A 401(k) is an employer-sponsored retirement savings account. When employment ends, 401(k) account owners can rollover 401(k) assets into a self-directed Individual Retirement Account. While there are many investment options approved by the Internal Revenue Service for IRAs, conservative investors who want to protect assets can open a bank IRA. The investment options include a bank savings, time certificate or money market account. Bank IRAs are insured by the Federal Deposit Insurance Corporation for up to $250,000 in total IRA bank assets per IRA owner.
Shop around at local banks for an institution offering the highest interest rates for the type of account you want your IRA to have.
Open a rollover IRA at the bank you choose to do business with. Make sure the bank titles the account the same way that the 401(k) is titled to ensure faster processing.
Call the customer service number on the 401(k) statement and request a rollover form. The representative will confirm your personal information for security purposes and double-check your address of record.
Fill out the rollover form using the bank rollover IRA account information. Check the box for a "direct rollover" and write down the name of the bank, the address and the account information where the 401(k) funds should be sent.
Submit the rollover form to the 401(k) administrator.
Tell the bank to expect the money within three to six weeks. A direct rollover moves assets from the 401(k) administrator directly to the new IRA custodian. This prevents federal tax withholding that is automatically taken from indirect rollover checks sent to 401(k) account owners.
References
- IRS: Topic 413 Rollovers
- Internal Revenue Service. "Rollovers of Retirement Plan and IRA Distributions." Accessed Apr. 10, 2020.
- Internal Revenue Service. "Retirement Plans FAQs Relating to Waivers of the 60-Day Rollover Requirement." Accessed Apr. 10, 2020.
- Internal Revenue Service. "IRA FAQs - Distributions (Withdrawals)." Accessed Apr. 10, 2020.
- Internal Revenue Service. "Publication 590-B (2019), Distributions from Individual Retirement Arrangements (IRAs)." Accessed Apr. 10, 2020.
- Internal Revenue Service. "Publication 590-A (2019), Contributions to Individual Retirement Arrangements (IRAs)." Accessed Apr. 10, 2020.
- Internal Revenue Service. "Topic No. 413 Rollovers from Retirement Plans." Accessed Apr. 10, 2020.
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With more than 15 years of professional writing experience, Kimberlee finds it fun to take technical mumbo-jumbo and make it fun! Her first career was in financial services and insurance.