Most folks prefer to move or rollover their retirement account balances once they retire or otherwise leave their current employer.
But what is the actual process?
Step One: Setup a rollover IRA at your custodian of choice.
We prefer T.D. Ameritrade and house nearly all client managed assets with them. If your retirement account contains designated ROTH contributions, you’ll need a Roth IRA as well.
Special situations such as after-tax dollars, low-basis stock, or retirement before age 59.5 require additional considerations. If you are looking at one of these situations, get help before you initiate a transfer!
Step Two: Contact your employer for a distribution or transfer forms.
Having completed hundreds of these over the years, they vary in scope and user-friendliness. At larger companies you can likely initiate the transfer online.In other cases you may need to sign and submit a paper form…and in some cases that form needs to be notarized.
Step Three: Initiate the Transfer.
As you initiate the transfer, make sure the money moves from trustee to trustee. This is accomplished by the check being made to your new custodian/trustee, but for your benefit.
So for me, that would be payable to “T.D. Ameritrade FBO Eric McClain, Account Number.” Often these checks are still sent to your home address, though sometimes they’ll forward them directly to the receiving custodian.
What about electronic transfers? Due to the administrative complexities and fiduciary liability on the employer and third-party administrator coupled with various IRS and DOL regulations, most retirement account balances move by good old paper check.
Step Four: Check in hand.
If you’re working with an advisor, they can facilitate sending this check via UPS so you’ll have tracking. Otherwise, you need to deliver the check to your custodian by mail or hand delivery.
Step Five: Check received, Deposit verified.
You (or your advisor) are all set to implement your investment strategy. Retirement investors may need income right away, but virtually every retirement investor still needs growth. Be sure you invest accordingly.
Optional Step Six: Setup Income.
We suggest clients setup a monthly “paycheck” complete with tax withholding (both federal, and state if applicable) just like they had while working. Keep in mind that your tax liability will likely go down in retirement, so you’ll want to update your estimated tax payments. Don’t overpay, and don’t pay too soon.
Have questions about moving your retirement accounts and preserving it’s tax status? Do you face one of the special situations we mentioned above? Don’t hesitate to reach out if we can be of assistance, and best wishes in retirement!