- 1). Establish an IRA account at a bank or other financial-services firm. Before you begin the transfer, you will need this account set up to receive your 401k funds.
- 2). Discuss your transfer options with your 401k administrator and your IRA custodian. Some 401k plans might charge a transfer fee if you decide to move your account; if this is the case, ask whether your new IRA custodian will reimburse you for the fee. Additionally, you should ask whether your account needs to be liquidated before it is transferred, or whether you can transfer over the securities (normally mutual funds) that you hold in your 401k.
- 3). Complete your transfer paperwork with your 401k provider. Normally, the easiest way to complete your transfer is to choose the "rollover" option, in which your 401k funds are sent directly to your IRA custodian. Some firms will offer to send you a check directly, but in this case the 401k administrator will retain 20 percent of your assets as tax withholding.
- 4). Monitor your account statements. Although most 401k rollovers go smoothly, mistakes do occur, so keep a close eye on the transfer and ensure that your funds are being processed. If your 401k assets are not in your IRA within 60 days, the transfer is considered a distribution, and you might have to pay income tax on the amount of your entire 401k.
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