How to Find Your Old 401k and Roll it Over without Paying Taxes or Penalties

Old 401(k)s. Odds are, you probably have one.  Maybe it’s an account at a job you had for six months and there’s $1,000 in it.  Or maybe it’s from a previous career where you were at the company for 10 years and there’s a $100,000 balance.  Either way, it’s your money, and it probably makes sense to reclaim it.  

But just because taking that step seems logical doesn’t mean that we do it.  Sometimes, it’s the opposite.  In working with thousands of people over my 20 years as a financial advisor, I’ve seen a lot of people with a lot of old 401(k)s.  

I’m going to help you change yours from old to current and here’s why:

401(k)s cost money.  The average fees range from 0.37% to 1.42%.  We’ll get deeper into this later on, but you can open an IRA with one of our Partners, like M1 Finance, for free.  Don’t think 1% makes that big of a difference?  Think again.  Rolling over an old 401(k) account into an IRA could potentially save you a lot of money over the long term.  Curious how much your current 401(k) costs you every year?  You can request your fee disclosure statement from your HR department, or you can ping us and we’ll get that info for you.  

There are two key parties and two terms involved with 401(k)s you need to know:

• Plan sponsor: This is your (former) employer that offered the retirement plan. 

• Recordkeeper: This is the financial company where your account and money is.  

• Rollover: This is when the recordkeeper sends your account balance to you directly. You have 60 days to deposit the funds into another plan or IRA.

• Transfer:  This is when the recordkeeper sends your account balance directly to another plan or IRA instead of sending you the funds. 

So, how does one track down old 401(k)s?    

Best case: Your previous employer is still in business and you can reach out to them directly.  HR will be able to get you the necessary paperwork or put you in touch with the record keeper who can help you.  If you know which recordkeeper the plan is with, you can also reach out to them directly.  Armed with your personal information, they’ll be able to help, as well.  

Worst case: Your previous employer is no longer in business, so there’s no one to reach out to.  If you remember who the recordkeeper was, you can reach out to them directly. (Perhaps you have an old statement laying around?)  Can’t remember?  Reach out to former coworkers and ask if they remember the name of the recordkeeper.  No luck?  Here are some other resources that can help you track down your account:

• The Pension Benefit Guaranty Corporation

• The Employee Benefits Security Administration

• MissingMoney.com

• The National Association of Unclaimed Property Administrators

• Still no luck?  Reach out. We have Partners who can help.

Now that you’ve located your account, you have three options: 

1. Cash out your old account.  This isn’t a good option and I don’t recommend you do it.  Should you decide to go this route, you may pay a 10% penalty if you’re under the age of 59 1/2, and you may pay income taxes as well.  Again, don’t do this unless you absolutely have to.  
2. Rollover or transfer your old account to your current 401(k).  If your current employer offers a 401(k), you can consolidate your old plan into your current plan.  Doing this should avoid any penalties or taxes.    
3. Rollover or transfer your old account to an IRA (Individual Retirement Account).  Doing this should avoid any penalties or taxes. 

Many people like moving their old 401(k) into their current 401(k) because of the convenience of having all their retirement accounts in one place.  Alternatively, many people like moving their old 401(k) into an IRA because it normally allows for more investment options and can also offer lower fees (This is of course dependent on your personal situation and account choices).    

If you’re ready to take control of your financial life, check out our DIY Financial Plan course. 

We’ve got three free courses as well: Our Goals Course, Values Course, and our Get Out of Debt course. 

Connect with one of our Certified Partners to get any question answered. 

You can access our Goals and Values Courses at no cost. 

If you’d like help getting on the same page with your partner, check out our Same $ Page Course. 

If you’d like to help your kids get good with money, check out our Teaching Kids about Money course. 

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