Moving Your 401(k) to Your New Employer With a Direct Rollover

Forgetting a 401(k) isn’t the only risk that you face when leaving your funds with your old employer. If you no longer work for the company that holds your 401(k), you can’t use those funds as a basis for a loan. While that’s not something you’re likely to do anyway, it is a right that you might want to keep.

If you can see that your new employer’s 401(k) is performing better than your old employer’s fund, then you’ll have another reason to move your funds over. You’ll need to perform a direct rollover.

That’s less complicated than it sounds.

A direct rollover simply moves your funds from one retirement account to another. There are no withdrawal penalties and no tax events.

First, you’ll need to talk to the HR department of your new employer. You’ll need to ask them where your old 401(k) should send your funds. They’ll give you an account address with your name as a beneficiary. Send that address to your old employer’s HR department and ask them to close your 401(k) account. (You can do this even if you’ve left the company on bad terms. They’ll still have to transfer the fund on your request.)

You might have to a pay fee to the investment firm that manages your funds but it won’t be much. Ideally, the money will then pass as a direct transfer between the two trustees. If your old 401(k) fund insists on giving you a check, that check will be written to your new 401(k) fund and not to you personally.