What are the rules for a 401(k) rollover?

I was recently released from my previous job and was hired by a new company with a new 401(k). I have a personal investment account and I am wondering if I can roll over my old 401(k) into an ETF account with my investment account or do I have to roll it over into an IRA type account?

Investing, 401(k), ETFs, IRAs
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September 2017

Congratulations on obtaining the new job, hopefully it was quick and smooth transition.

You will not want to rollover or distribute your old 401(k) into your investment account as this would be a taxable event for which you would be responsible for paying taxes plus a 10% early withdrawal penalty (I am assuming you are under 59 1/2 years of age and the investment account is not an IRA).

You do have a couple of options though.  You could review the options being offered in the new companies 401(k) plan and roll the assets over into that plan if it makes sense.  This would consolidate assets and may work well.  You have to be happy with the structure of the new plan, the costs and the investment lineup being offered.

Another option would be to open an IRA and perfrom a direct rollover.  I would imagine you could open the IRA with the same firm you have the investment account with and simply invest this new account in the same manor.  This would place the funds in the same firm, same strategy and would not incur a taxable event.

The last thing to consider would be opening a Roth IRA and rolling the assest into this account.  You would have to pay taxes on the distribution, but depending on your income for the year it may make sense.  The key here would be to know how long you were out of work for and what your income would look like to see if this made sense.  You could go ahead and open this account as well with the same provider as your investment account and invest it in the same manor too.

This is a complicated question and one yo should not decide on lightly, especially if the 401(k) is of size.  I highly recommned you consult with a fiduciary advisor, your tax professinal and other members of your financial team prior to making a decision.

Best of luck in working through this and with the new job!

September 2017
September 2017