A 401(k) rollover is a crucial financial decision that allows you to move your retirement savings from a former employer's plan into a new retirement account, such as an IRA or your new employer's 401(k). This can offer greater control, potentially lower fees, and a wider range of investment options. If you're looking to roll over your 401(k) to Empower, whether it's an old 401(k) or consolidating existing accounts, this comprehensive guide will walk you through every step.
Navigating Your Retirement Savings: A Step-by-Step Guide to Rolling Over to Empower 401(k)
Are you wondering what to do with that old 401(k) from a previous job? Leaving it behind can mean losing track of your hard-earned retirement savings, or being stuck with limited investment choices and higher fees. Taking control of your financial future is key, and rolling over your 401(k) to Empower can be a smart move. Let's get started!
Step 1: Evaluate Your Options and Why Empower
Before you initiate any transfer, it's vital to understand your choices and why Empower might be the right fit for you.
Sub-heading: Understanding Your Rollover Choices
When you leave an employer, you generally have a few options for your old 401(k):
Leave it in your former employer's plan: This is the "do nothing" option. It might be suitable if the plan has low fees and excellent investment options, but you lose direct control and may forget about it.
Cash it out: Generally not recommended! Cashing out means you'll pay income taxes on the entire amount, and if you're under 59½, you'll likely face an additional 10% early withdrawal penalty. This can severely deplete your retirement savings.
Roll it over into your new employer's 401(k): If your new employer offers a 401(k) and it accepts rollovers, this can be a good way to consolidate your retirement savings in one place.
Roll it over into an Individual Retirement Account (IRA): This is often a popular choice due to the wider variety of investment options, potentially lower fees, and more control.
Sub-heading: Why Choose Empower for Your Rollover?
Empower is a significant player in the retirement services industry. Rolling over to Empower, whether it's into an Empower-managed 401(k) through a new employer or an Empower IRA, can offer several benefits:
Consolidation: Bringing all your retirement accounts under one roof with Empower can simplify management and give you a clearer picture of your overall financial health.
Diverse Investment Options: Empower typically offers a broad range of investment choices, from mutual funds and ETFs to target-date funds, allowing you to tailor your portfolio to your risk tolerance and goals.
Guidance and Tools: Empower often provides online tools, resources, and even financial advisors to help you make informed investment decisions and plan for retirement.
Potential for Lower Fees: Depending on your previous 401(k) plan, rolling over to an Empower IRA or a new Empower 401(k) might result in lower administrative and investment fees. Always compare the fee structures!
Step 2: Gather Necessary Information and Documents
Preparation is key to a smooth rollover process. You'll need specific details from both your old 401(k) provider and Empower.
Sub-heading: Information from Your Old 401(k) Provider
Account Number: Your specific account identification.
Plan Administrator Contact Information: Phone number, website, and potentially fax number for their rollover department.
Current Balance: The exact amount you intend to roll over.
Type of Funds: Determine if your 401(k) holds pre-tax (traditional) contributions, Roth (after-tax) contributions, or a mix of both. This is crucial for tax implications during the rollover.
Distribution Options: Understand their specific procedures for rollovers (direct vs. indirect). Ask if they can send the check directly to Empower.
Statement: Have your most recent account statement handy.
Sub-heading: Information for Your Empower Account
Empower Account Number: If you already have an Empower IRA or 401(k). If not, you'll need to open one (see Step 3).
Empower's Rollover Department Contact: Get their direct phone number and mailing address for rollover checks.
Routing and Account Numbers (for direct transfers/wires): If Empower supports direct electronic transfers, obtain these details.
Forms: Empower will likely have specific incoming rollover forms that you'll need to complete.
Step 3: Choose Your Rollover Method: Direct vs. Indirect
This is a critical decision with significant tax implications.
Sub-heading: Direct Rollover (Recommended)
A direct rollover is the most common and generally recommended method. In a direct rollover:
Your old 401(k) provider sends the funds directly to Empower.
The check is usually made payable to "Empower FBO [Your Name]" or directly to the new plan.
No taxes are withheld, and you avoid any potential penalties, as the money never touches your hands.
This method minimizes the risk of tax penalties and simplifies the process.
Sub-heading: Indirect Rollover (Use with Caution)
An indirect rollover, also known as a 60-day rollover, involves:
Your old 401(k) provider sending the check payable to you.
20% of your taxable distribution will be withheld for federal income tax. This means you'll receive only 80% of your account balance.
You then have 60 days from the date you receive the funds to deposit the full original amount (including the 20% that was withheld) into your Empower account. If you don't deposit the full amount, the portion not rolled over will be considered a taxable distribution and may be subject to a 10% early withdrawal penalty if you're under 59½. You would need to make up the 20% withholding from other funds.
You are generally limited to one indirect rollover per 12-month period across all your IRAs.
Indirect rollovers are generally only advised if you need the funds for a very short-term loan and are absolutely certain you can redeposit the full amount within the 60-day window.
Step 4: Initiate the Rollover with Both Providers
Once you've decided on your rollover method, it's time to act.
Sub-heading: Contacting Your Old 401(k) Provider
Call their customer service or rollover department. Clearly state that you wish to perform a direct rollover of your 401(k) to Empower.
Provide all necessary information: Your account number, the amount you're rolling over, and Empower's account details (including the specific mailing address for rollover checks if it's a check-based direct rollover).
Request the necessary forms: They may require you to complete a distribution or rollover request form. Fill it out accurately.
Confirm the payment method: Reiterate that you want a direct rollover, with the check made payable to Empower or the new plan.
Keep detailed records of who you spoke with, the date, and any reference numbers.
Sub-heading: Notifying Empower
If you don't have an Empower account, open one. This usually involves applying for a Rollover IRA or setting up your new employer's 401(k) access.
Inform Empower about the incoming rollover. They may have a specific "Incoming Rollover" form for you to complete. This helps them anticipate and correctly process the funds when they arrive.
Provide any information they request about your previous plan and the amount being rolled over.
Some providers, like Empower, may offer assistance in contacting your previous provider to facilitate the rollover. Don't hesitate to ask if this service is available!
Step 5: Monitor the Transfer Process
Rollovers can take some time, so patience and proactive monitoring are important.
Allow several weeks: The entire process, from your old plan releasing funds to Empower receiving and investing them, can take anywhere from 2 to 4 weeks, or sometimes longer.
Track the funds:
If a check is mailed: Confirm with your old provider that the check has been sent. Then, confirm with Empower when they receive and process it.
If an electronic transfer: Verify with both institutions that the transfer has been initiated and completed.
Check your Empower account: Once the funds are received, they will typically be held in a cash sweep account. You'll then need to invest them according to your chosen portfolio within Empower.
Step 6: Invest Your Rolled Over Funds
Receiving the funds in your Empower account is not the final step. You need to put that money to work!
Log in to your Empower account.
Review your investment options: Explore the various mutual funds, ETFs, and other investment vehicles available through Empower.
Allocate your funds: Based on your financial goals, risk tolerance, and time horizon, select the investments that best suit your needs. If you're unsure, consider utilizing Empower's advisory services or target-date funds for a diversified, hands-off approach.
Confirm your investment choices and ensure the funds are properly allocated.
Step 7: Confirm and Update Your Records
Once the rollover is complete and funds are invested, a few final administrative tasks are in order.
Obtain confirmation: Get written confirmation from both your old provider (that the account is closed or balance is zero) and Empower (that the funds have been fully received and invested).
Update your financial records: Reflect the change in your retirement savings location and consolidate your financial overview.
Consider tax implications (if applicable): If you performed a Roth conversion during your rollover, remember to account for the taxable income on your next tax return.
By following these steps, you can effectively take control of your retirement savings and roll over your 401(k) to Empower, setting yourself up for a more organized and potentially prosperous financial future.
Frequently Asked Questions (FAQs) about 401(k) Rollovers to Empower
Here are 10 common questions with quick answers to help you further understand the process:
How to initiate a 401(k) rollover to Empower? Contact your old 401(k) plan administrator and inform them you want to perform a direct rollover to Empower. Simultaneously, notify Empower of the incoming rollover and complete any required forms.
How to choose between a Traditional IRA and a Roth IRA for my rollover with Empower? If your 401(k) funds were pre-tax, you can roll them into a Traditional IRA without paying taxes now. If you roll them into a Roth IRA, you'll pay taxes on the converted amount, but future qualified withdrawals will be tax-free. If your 401(k) had Roth contributions, you can roll them into a Roth IRA tax-free.
How to avoid taxes and penalties during an Empower 401(k) rollover? Opt for a direct rollover where funds are transferred directly from your old plan to Empower. This avoids any tax withholding or potential penalties.
How to find my old 401(k) account details for the rollover? Check old statements, tax documents, or contact your former employer's HR or benefits department.
How to contact Empower's rollover specialist team? Empower's general customer service number for participants is typically 1-855-756-4738. You can also visit their website and look for "Contact Us" or "Rollover Resources."
How to track the progress of my 401(k) rollover to Empower? Regularly check your online accounts with both your old provider and Empower. You can also call their customer service lines for updates.
How to decide what to invest in after rolling over to Empower? Empower offers various investment options. Consider your age, risk tolerance, and financial goals. You can explore their target-date funds, diversified portfolios, or consult with one of their financial advisors if available.
How to handle company stock in my old 401(k) during a rollover? Rolling over company stock can have specific tax implications (Net Unrealized Appreciation, or NUA). It's highly advisable to consult with a financial advisor or tax professional before making a decision on company stock.
How to roll over an old Roth 401(k) to Empower? You can directly roll over your Roth 401(k) funds into an Empower Roth IRA, and this will be a tax-free transfer since the contributions were already taxed.
How to consolidate multiple old 401(k)s into one Empower account? You would follow the rollover process for each individual old 401(k) plan, directing each rollover into your single Empower IRA or new employer's Empower 401(k). This helps simplify your retirement planning significantly.
