401(k) Rollover to a New Employer: Step-by-Step Guide

Changing jobs is an exciting milestone, but it also comes with a checklist of important financial decisions. One of the most significant is what to do with your old 401(k). For many, rolling over a 401(k) to a new employer’s plan is the best way to consolidate retirement savings, simplify account management, and maintain the tax-advantaged growth that makes these accounts so powerful. But the process can feel daunting if you’ve never done it before.

This guide is designed to demystify the 401(k) rollover. We’ll break down your options, walk you through each step, highlight common mistakes to avoid, and explain how tools like Beem can keep you organized and confident throughout the transition. By the end, you’ll know exactly how to move your retirement savings without missing a beat — or a dollar. Here’s your guide to 401(k) rollover to a new employer.

Know Your Options Before You Begin

Before initiating a rollover, you must understand all your choices. Each option has its own pros and cons, and the best path depends on your career plans, financial goals, and the features of your old and new retirement plans.

Leave Your 401(k) With Your Former Employer

In many cases, you can simply leave your 401(k) where it is, especially if your balance is above $5,000. This can be the path of least resistance, but there are trade-offs.

Pros:

• No immediate action required.
• Your investments remain as they are, and your money continues to grow tax-deferred.

Cons:

• You can’t make new contributions.
• You might lose access to certain plan features or support.
• Risk of losing track of the account as you move through your career.

Roll Over to an IRA vs. New Employer’s 401(k)

Another option is to roll your old 401(k) into an Individual Retirement Account (IRA) rather than your new employer’s plan. Here’s how the two compare:

IRA Rollover:

• Offers a wider range of investment options and potentially lower fees.
• Gives you greater control over your account.
• No ability to take loans from an IRA.

New Employer’s 401(k):

• Keeps your retirement savings consolidated in one place.
• May allow for loans and continued contributions.
• Investment choices are limited to what the plan offers.

Cashing Out: Risks and Consequences

Cashing out your 401(k) is almost never a good idea unless you’re facing a true emergency. Here’s why:

• You’ll pay income tax on the entire amount withdrawn.
• If you’re under 59½, you’ll pay a 10% early withdrawal penalty.
• Your retirement savings will take a significant hit, setting you back years.

Step-by-Step Guide to Rolling Over Your 401(k) to a New Employer

Ready to make the move? Here’s how to roll over your 401(k) to your new employer’s plan, step by step.

Step 1 – Review Your New Employer’s 401(k) Plan

Start by confirming that your new employer’s plan accepts rollovers. Not all plans do, and some have waiting periods before you can participate. Request a copy of the plan summary or speak with the HR department to get the details. Find out:

• When you’re eligible to join the plan.
• What investment options are available.
• Whether you can roll over both pre-tax and Roth 401(k) funds.

Step 2 – Gather Information from Both Plans

Contact your old and new plan administrators. You’ll need to know:

• The process and paperwork required for a rollover.
• The exact payee and account details for the transfer.
• Any fees, blackout periods, or restrictions that might apply.

Ask your old plan if there are any outstanding loans or unvested balances you should be aware of. Make sure your contact information with both providers is up to date.

Step 3 – Decide on the Rollover Method

There are two main ways to move your money: direct rollover and indirect rollover.

Direct Rollover (Trustee-to-Trustee Transfer):

• The safest and most common method.
• Your old plan sends the funds directly to your new plan.
• No taxes withheld, no risk of penalties.

Indirect Rollover:

• Your old plan sends a check to you (often with 20% withheld for taxes).
• You must deposit the full amount (including the withheld portion) into your new plan within 60 days.
• If you miss the deadline or don’t deposit the full amount, you’ll owe taxes and penalties.

Whenever possible, choose the direct rollover to avoid unnecessary complications.

Step 4 – Initiate the Rollover

Once you’ve chosen your method, complete the required paperwork. For a direct rollover, you’ll typically need to:

• Fill out a rollover request form from your old plan.
• Provide the account and payee details for your new employer’s plan.
• Confirm the investment allocations for your incoming funds.

Track the process and follow up with both plan administrators to ensure the funds arrive safely. Keep copies of all forms and correspondence for your records.

Step 5 – Invest and Monitor Your Funds

After the rollover is complete, review your investment choices in the new plan. If you haven’t already, select allocations that match your risk tolerance and retirement timeline. Set reminders to check your account periodically and rebalance your portfolio as needed.

Mistakes to Avoid During a 401(k) Rollover

Rolling over a 401(k) is straightforward, but there are several common pitfalls to watch out for:

• Missing the 60-Day Deadline: If you’re doing an indirect rollover, the IRS gives you 60 days to deposit the funds into a new plan. If this window is missed, the distribution becomes taxable income.
• Mixing Pre-Tax and Post-Tax Funds: If you have both traditional and Roth 401(k) balances, make sure they are rolled over into the correct accounts to avoid tax headaches later.
• Incorrect Payee or Mailing Information: Double-check all details to ensure your funds aren’t delayed or lost.
• Neglecting Beneficiary Updates: After the rollover, review and update your beneficiary designations.
• Not Keeping Documentation: Save all paperwork and confirmation letters in case you need to prove the rollover was completed correctly.

How Beem Can Simplify Your 401(k) Rollover

Managing a 401(k) rollover can feel overwhelming, especially when you’re also navigating a new job. Beem is designed to make the process smoother and more organized, so you can focus on your career and your future.

Using Beem’s Budget Planner

• Track Progress: Beem’s Budget Planner lets you monitor the status of your rollover, set reminders for important deadlines, and keep all relevant paperwork in one place.
• Set Savings Goals: Use Beem to plan future contributions to your new 401(k) and visualize your progress toward retirement.
• Stay Organized: With Beem, you can easily compare fees, investment options, and performance between your old and new plans, helping you make informed decisions.

Leveraging Beem for Financial Planning During Job Transitions

• Plan for Gaps: If you have a gap between jobs, Beem helps you budget for living expenses without tapping into your retirement savings.
• Emergency Support: Beem’s Everdraft™ feature offers a safety net for unexpected expenses, so you don’t feel pressured to cash out your 401(k) early.
• Long-Term View: Use Beem’s tools to keep your retirement strategy on track, even as your career evolves.

Conclusion

Rolling over your 401(k) to a new employer’s plan is one of the smartest moves you can make during a job change. It consolidates your retirement savings, simplifies account management, and ensures your money grows tax-advantaged. By understanding your options, following a clear process, and leveraging tools like Beem to stay organized, you can avoid costly mistakes and keep your financial future on track.

Remember, your retirement savings are one of your most valuable assets. For any financial aid, you can check out Beem. It is a smart wallet app with numerous features, from cash advances to help with budgeting and even tax calculations. In addition, Beem’s Everdraft™ lets you withdraw up to $1,000 instantly and with no checks. Download the app here.

FAQs On 401(k) Rollover to a New Employer