2. Determine where to transfer your funds
The rollover process isn't difficult but you must first decide where you will rollover your 401(k) funds. If you simply transfer them into a personal account, you may be responsible for taxes and early withdrawal fees. Instead, plan to rollover your 401(k) into another tax-advantaged plan to maintain the same tax advantages and avoid penalties.
There are two types of accounts that allow you to avoid taxes and penalties: another 401(k) and an IRA. If your new employer offers a 401(k), you can roll your funds over to a new 401(k) there. If not, or if you simply want to have more control over your account, you can roll your 401(k) into an IRA.
When you choose an IRA, you can make your own choices about where to invest your retirement funds or you can use a financial advisor. With a new 401(k), investment decisions will be made by the manager that your new employer chooses.
3. Reach out to rollover
When you have an account set up for the rollover, you'll need to contact the people who will complete the rollover process for you, whether it's an IRA or a new 401(k). That will involve contacting your former employer to let them know you're rolling over to a new employer and contacting the financial institution that houses your rollover account. You'll need to complete paperwork for both your former employer and your financial institution, which will ask for information such as your 401(k) account number and the account number for your rollover account.
After you've completed the paperwork, your financial institution will handle the rollover. When it's complete, you can continue contributing to your 401(k) and managing your investments so you can prepare for a happy retirement.