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I kept my money in the company 401 after leaving 4 years ago. In my first attempt to withdraw funds I figured it was like my brokerage account, a few clicks and the money is transferred to my bank account, But no, apparently I need a form, which takes days to receive, and then that form needs to be signed by the HR person at my former job. I can't even imagine how awkward this would be had I been fired instead of retiring. 7-10 days later I receive a check which I will need to take to the bank and deposit and then wait for it to clear. It's like I was bounced back to 1986 and the whole process will take weeks.
So I'm not doing all this, I'm opening an IRA with Fidelity. Are there any things I need to know? Right off the bat their site is asking for my SS number, I'm concerned about entering that on a web site that I can't guarantee is secure. Or is that an unfounded fear?
They make you fill out a form to move money out of the 401K so you don't trigger a tax bill on an unintentional taxable distribution of retirement funds. If a person has a fat 401K after many decades of contributions and growth, imagine if all that was sent at once to the retiree, and the retiree did not know they had just 60 days to get it deposited back into a "rollover IRA". Imagine the lawsuits too. Hence, to move funds out of a 401K, the 401K administrator needs documentation that they are informing the account holder of the taxable consequences if they receive the funds and don't deposit them within 60 days to an IRA.
Most people who move their 401K to a rollover IRA account have the funds moved electronically to the new rollover IRA, so there is never any confusion on the part of the IRS that a taxable distribution has occurred. I have done two 401K transfers to two separate rollover IRA accounts, and never had any tax bill for a distribution because I had the funds transferred direct to the rollover IRA. It is crazy to have a "check" sent directly to yourself.
OP, Are you at URL of https://www.fidelity.com? If so, just follow all of the instructions and enter the data they ask for to open a new rollover IRA account. Be sure to click rollover IRA, not traditional IRA. Sure, they ask name, SS, address, birthdate, citizenship, but what financial account doesn't ask that stuff? If you don't want to do that, go to one of their customer service centers which may or may not be near where you live.
I’ve done many direct IRA transfers over the years. Don’t recommend taking receipt of the funds. The entire process shouldn’t take more than a couple of weeks. Some companies will accept an electronic signature, some will not. Some require a signature guarantee, some do not. Often depends on the amount. Call the company where the funds are currently and ask what is required.
I kept my money in the company 401 after leaving 4 years ago. In my first attempt to withdraw funds I figured it was like my brokerage account, a few clicks and the money is transferred to my bank account, But no, apparently I need a form, which takes days to receive, and then that form needs to be signed by the HR person at my former job. I can't even imagine how awkward this would be had I been fired instead of retiring. 7-10 days later I receive a check which I will need to take to the bank and deposit and then wait for it to clear. It's like I was bounced back to 1986 and the whole process will take weeks.
So I'm not doing all this, I'm opening an IRA with Fidelity. Are there any things I need to know? Right off the bat their site is asking for my SS number, I'm concerned about entering that on a web site that I can't guarantee is secure. Or is that an unfounded fear?
If you are setting up an IRA with Fidelity, your S/S number is required. We have two IRAs and a brokerage account at Fidelity, and handle everything online.
Do not have the funds first distributed to you and then you give the funds to Fidelity. That just creates a risk of creating a taxable distribution if not handled timely and, maybe, added paperwork on your part. I wouldn't even speak directly with the 401k administrator unless absolutely necessary. Instead, talk to the folks at Fidelity and let them handle a direct transfer to your new IRA as a trustee to trustee transfer. They will deal with your 401k administrator. That doesn't mean it will be easy or quick, as some 401k plan administrators make it difficult to transfer the funds.
If you are setting up an IRA with Fidelity, your S/S number is required. We have two IRAs and a brokerage account at Fidelity, and handle everything online.
Do not have the funds first distributed to you and then you give the funds to Fidelity. That just creates a risk of creating a taxable distribution if not handled timely and, maybe, added paperwork on your part. I wouldn't even speak directly with the 401k administrator unless absolutely necessary. Instead, talk to the folks at Fidelity and let them handle a direct transfer to your new IRA as a trustee to trustee transfer. They will deal with your 401k administrator. That doesn't mean it will be easy or quick, as some 401k plan administrators make it difficult to transfer the funds.
The transfers that have gone the best for me have been where I called the old carrier and asked what they needed and then confirmed this with the new carrier. The new carrier is not always up-to-date on what the old carrier will accept. I recently did a partial transfer from TRP to another carrier. They would not accept an electronic signature. I definitely would call the 401k administrator and ask what they will accept and exactly what you need to do. It could potentially save yourself a lot of trouble.
Thanks for the feedback everyone. It is a substantial amount of money and I first talked with the firm that currently holds the 401. They were the ones to tell me I need to open a new IRA with whomever and then they will transfer the funds via check, which still sounds crazy. I was concerned that the funds will not be deposited in time to avoid a big tax bill but I was assured it would not be a problem.
So once I open the account is my call to Fidelity or the previous fund managers? When you say "administer" would that be the person at my former company or the group the 401 is currently being held?
No concerns about simply typing my SS number into the Fidelity site? I guess that's just being cautious but there is a possibility that this is a roque site and not Fidelity.
You misunderstood…when the transfer is done directly by them , even by check , there is no time limit like there is if you take control of the check first …
That check can get lost and it is no concern of yours since when direct you are not taxed on the 61st day
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