People are currently reading this guide.
Have you recently changed jobs, or are you approaching retirement, and wondering what to do with that old 401(k)? Leaving your retirement savings scattered across multiple old employer accounts can make it difficult to manage your investments and track your overall financial progress. Rolling over your 401(k) to an Individual Retirement Account (IRA) at Edward Jones can be a smart move, offering you greater control, more investment options, and personalized guidance. This comprehensive guide will walk you through each step of the process, ensuring a smooth and tax-efficient transfer of your hard-earned retirement savings.
Why Consider Rolling Over Your 401(k)?
Before we dive into the "how-to," let's quickly understand why a rollover might be beneficial for you:
- Consolidation: Bringing all your retirement accounts under one roof simplifies management and provides a holistic view of your financial picture.
- Expanded Investment Options: Employer-sponsored 401(k) plans often have limited investment choices. An IRA at Edward Jones can offer a much wider array of investment products, including stocks, bonds, mutual funds, and ETFs, allowing for greater diversification and tailored strategies.
- Personalized Guidance: Edward Jones emphasizes a personalized approach with a dedicated financial advisor who can help you align your investments with your specific financial goals and risk tolerance.
- Flexibility: An IRA can offer more flexibility in terms of withdrawals (though early withdrawal penalties still apply before age 59½, with some exceptions).
- Potentially Lower Fees (in some cases): While IRAs can have fees, comparing them to your old 401(k)'s administrative and investment fees is crucial. Sometimes, IRAs offer more competitive fee structures.
The Step-by-Step Guide: How to Rollover Your 401(k) to Edward Jones
This process might seem daunting, but by breaking it down into manageable steps, you'll find it's quite straightforward.
Step 1: Engage with Your Edward Jones Financial Advisor (This is where you come in!)
Are you ready to take control of your retirement savings? The very first and arguably most crucial step is to connect with an Edward Jones financial advisor. They are your primary resource throughout this entire process.
- Find an Advisor: If you don't already have one, visit the Edward Jones website or use their "Find an Advisor" tool to locate a local office.
- Initial Consultation: Schedule an initial consultation. This meeting is your opportunity to discuss your financial goals, understand the rollover process in detail, and have all your questions answered. Your advisor will help you determine if a rollover is the right strategy for your individual situation. They'll also help you choose the appropriate IRA type (Traditional or Roth, which we'll discuss shortly).
Step 2: Understand Your Current 401(k) Plan
Before initiating any transfer, you need to gather information about your existing 401(k) plan.
- Contact Your Former Employer or Plan Administrator: Reach out to the human resources department of your former employer or directly to the 401(k) plan administrator (e.g., Fidelity, Vanguard, Empower, etc.).
- Gather Key Information: You'll need to ascertain:
- Your current 401(k) account balance.
- The types of investments you hold within the 401(k).
- Any specific distribution or rollover requirements or forms.
- Whether your plan allows for a direct rollover to an IRA. Most plans do, but it's essential to confirm.
- Any fees associated with taking a distribution or initiating a rollover from the 401(k) plan.
- If you have any outstanding 401(k) loans. (If you do, discuss this immediately with your Edward Jones advisor, as it can complicate the rollover and potentially trigger tax implications if not handled correctly.)
- Your last 401(k) statement. This will be invaluable for verifying account numbers and details.
Step 3: Choose Your Rollover Method: Direct vs. Indirect
This is a critical decision that impacts tax implications. Your Edward Jones advisor will guide you, but it's good to understand the difference.
Sub-heading: Direct Rollover: The Preferred Method
- What it is: In a direct rollover, the funds are transferred directly from your old 401(k) plan administrator to your new Edward Jones IRA custodian. You never physically receive the money.
- Why it's preferred: This method is generally recommended because it avoids the 20% mandatory federal tax withholding that occurs with indirect rollovers. It also bypasses the 60-day rule.
- How it works: Your Edward Jones advisor will often facilitate this by providing the necessary forms to your old 401(k) administrator, authorizing the direct transfer. The check will be made payable to "Edward D. Jones & Co., L.P. FBO [Your Name]" or similar.
Sub-heading: Indirect Rollover: Proceed with Caution
- What it is: In an indirect rollover, a check is issued to you (the account holder) from your old 401(k) plan. You then have 60 days from the date you receive the funds to deposit them into your new Edward Jones IRA.
- The 20% Withholding: The significant drawback here is that your old 401(k) plan is legally required to withhold 20% of the distribution for federal income taxes. If you want to roll over the full amount, you'll need to make up that 20% from other personal funds within the 60-day window. If you don't, the withheld amount will be considered a taxable distribution and could be subject to a 10% early withdrawal penalty if you're under 59½.
- The 60-Day Rule: Failing to deposit the entire amount (including the 20% withheld) into your IRA within 60 days will result in the entire distribution being treated as a taxable withdrawal, plus potential penalties.
- One-Per-Year Rule (for IRAs): There's also a "one indirect rollover per 365 days" rule that primarily applies between IRAs, but it's another reason to favor direct rollovers from 401(k)s.
Always aim for a direct rollover to avoid tax headaches and penalties.
Step 4: Open Your Edward Jones IRA Account
Your Edward Jones financial advisor will assist you with opening the appropriate IRA account.
- Traditional IRA vs. Roth IRA:
- Traditional IRA: If your 401(k) was a traditional (pre-tax) 401(k), you'll typically roll it into a Traditional IRA. This keeps the money tax-deferred, meaning you won't pay taxes until you withdraw it in retirement. Contributions may have been tax-deductible.
- Roth IRA: If you had a Roth 401(k) (after-tax contributions), you can roll it into a Roth IRA tax-free. If you have a traditional 401(k) and want to convert it to a Roth IRA, this is called a "Roth conversion." Be aware: A Roth conversion is a taxable event, as you'll pay taxes on the converted amount in the year of the conversion. Discuss the implications with your advisor and a tax professional.
- Required Documentation: Be prepared to provide:
- Government-issued ID (driver's license, passport)
- Social Security number
- Your Edward Jones account number (once established)
- Contact information for your previous 401(k) administrator
Step 5: Complete the Rollover Paperwork
This is where your Edward Jones advisor truly shines.
- Transfer Authorization Form: Your Edward Jones advisor will help you complete a "Transfer Authorization Form" or similar paperwork. This form grants Edward Jones permission to request the funds from your old 401(k) plan.
- Old Plan's Forms: Your old 401(k) administrator may also have specific forms they require for a distribution or rollover. Your Edward Jones advisor will help you identify and complete these.
- Review Carefully: Double-check all information on the forms, especially account numbers, names, and rollover instructions, to prevent delays or errors.
Step 6: Monitor the Transfer Process
Once the paperwork is submitted, the waiting game begins.
- Timeline: A direct rollover typically takes 5 to 10 business days to complete, though it can vary.
- Stay in Touch: Your Edward Jones advisor will monitor the transfer's progress. You can also contact your old 401(k) administrator for updates.
- Confirmation: Once the funds are received by Edward Jones, you'll get a confirmation. Verify that the full balance has been transferred and that your new IRA account reflects the correct amount.
Step 7: Invest Your Rolled Over Funds
This is where the magic of consolidation and expanded options comes into play.
- Work with Your Advisor: Your Edward Jones financial advisor will work with you to create a personalized investment strategy based on your financial goals, time horizon, and risk tolerance.
- Diversification: They will help you diversify your portfolio across various asset classes and investment products available at Edward Jones.
- Regular Reviews: Schedule regular reviews with your advisor to ensure your investments remain aligned with your evolving financial situation.
Step 8: Consider Tax Implications and Record Keeping
Even with a direct rollover, there are reporting requirements.
- Form 1099-R: You will receive a Form 1099-R from your old 401(k) plan administrator. This form reports the distribution from your 401(k).
- Form 5498: Edward Jones will send you a Form 5498, which reports the amount rolled into your IRA.
- Tax Professional: It is highly recommended to consult with a qualified tax professional to ensure your rollover is reported correctly on your tax return and to understand any potential implications, especially if you performed an indirect rollover or a Roth conversion.
- Keep Records: Maintain copies of all documentation related to your rollover for your records, including statements, forms, and communication with both your old plan administrator and Edward Jones.
10 Related FAQ Questions:
How to choose between a Traditional and Roth IRA for my rollover?
- Quick Answer: If your 401(k) was pre-tax (traditional), rolling to a Traditional IRA maintains tax-deferred growth. If it was a Roth 401(k), roll it to a Roth IRA for tax-free growth and withdrawals in retirement. Converting a traditional 401(k) to a Roth IRA is a taxable event, so consider your current and future tax brackets and consult a tax advisor.
How to find my old 401(k) plan administrator?
- Quick Answer: Start by contacting the HR department of your former employer. If they can't assist, check old statements or employer onboarding documents. Websites like the National Registry of Unclaimed Retirement Benefits might also help if your former employer no longer exists or the plan has changed administrators.
How to avoid taxes and penalties on a 401(k) rollover?
- Quick Answer: Perform a direct rollover where funds move directly from your old 401(k) to your new Edward Jones IRA. This avoids the 20% mandatory tax withholding and the 60-day rule, ensuring a tax-free transfer.
How to handle an outstanding 401(k) loan during a rollover?
- Quick Answer: You generally must repay the loan in full before rolling over the 401(k). If not repaid, the outstanding loan balance is typically treated as a taxable distribution and subject to income tax and a 10% early withdrawal penalty if you're under 59½. Discuss this immediately with your Edward Jones advisor and your old plan administrator.
How to know what fees are associated with an Edward Jones IRA?
- Quick Answer: Edward Jones offers various account types with different fee structures (e.g., commission-based brokerage accounts, fee-based advisory programs). Your financial advisor will clearly explain all applicable fees, including program fees, investment management fees, and internal fund expenses, based on the account type and investments you choose.
How to ensure my investments are appropriate after a rollover?
- Quick Answer: Your Edward Jones financial advisor will conduct a thorough needs analysis to understand your financial goals, risk tolerance, and time horizon. They will then recommend a diversified portfolio of investments tailored to your specific situation, and you should review this with them regularly.
How to track the progress of my 401(k) rollover?
- Quick Answer: Your Edward Jones financial advisor will typically monitor the transfer process for you and provide updates. You can also contact your former 401(k) plan administrator directly to inquire about the status of the distribution request.
How to consolidate multiple old 401(k)s into one Edward Jones IRA?
- Quick Answer: Yes, you can roll over multiple old 401(k) accounts from various employers into a single Edward Jones IRA. This is a common and beneficial strategy for simplifying your retirement planning. The process for each old 401(k) will follow the steps outlined above.
How to handle employer stock in my 401(k) during a rollover?
- Quick Answer: If your 401(k) holds employer stock, rolling it over to an IRA might have different tax implications compared to taking a lump-sum distribution and using the "Net Unrealized Appreciation" (NUA) strategy. Consult a tax professional to determine the most tax-efficient way to handle employer stock.
How to contact Edward Jones for 401(k) rollover assistance?
- Quick Answer: The best way is to connect with an Edward Jones financial advisor directly. You can find a local advisor on their website (
www.edwardjones.com
