How We Manage Your 401(k) Rollover

Summary: I’m a fee-only financial advisor who helps clients roll over their 401(k) balances into IRAs. This is not a generic explainer of “how rollovers work.” Most of what happens in a 401(k) rollover isn’t a decision you need to make; it’s paperwork and process that I handle. Here’s the exact process, step by step, including what happens if your provider sends a check instead of a wire, how long this all takes, etc.

The Entire Process Takes About 30 Minutes of Your Time

Most articles about 401(k) rollovers are written for people who are doing it themselves. This one isn’t. This is what it actually looks like when I do it for you. In my experience, the anxiety around a rollover has almost nothing to do with the financial mechanics and almost everything to do with not knowing what’s about to happen to your money or how long or complicated everything will be.

Here are the key steps:

• Send me your latest 401(k) statement
• Set up an IRA if we don’t have one already
• Call your 401(k) provider together
  • If your provider sends the funds directly, we’re finished
  • If your provider sends a check, I’ll provide an envelope for you to forward
• I let you know when the funds have been received and then invest them according to your investment strategy

The process on your end will take about 30 minutes active time in total.

Note, at this time we primarily use Schwab as our custodian so all steps will refer to how our process works with them. Let’s dive into each of the steps.

Step 1: Send me your latest 401(k) statement

I need your statement in order to:

• Confirm your name and address. To avoid complications, we need to check your name and address with your 401(k) provider matches your name and address at Schwab.
• Check that your funds have all vested. Some 401(k) plans have vesting periods. If you transfer funds before they are fully vested you may be leaving money on the table.
• Ensure we set up the right types of accounts with Schwab. Some clients contribute to traditional, pretax 401(k) plans, others use Roth 401(k), and some have a mix of both. 401(k) funds must be sent to the corresponding IRA types.
• Get the contact information of the plan provider. This will be used for when we reach out to them together in Step 3.

Step 2: Set up IRAs at Schwab if we don’t have them already

We need to make sure we have somewhere for your 401(k) funds to go. If we haven’t set up IRAs already, we will need to do this before reaching out to your 401(k) provider.

As with most our account setup processes, we streamline this for you. Our team will set up the account details with Schwab and then you will receive a DocuSign that takes no more than a minute to review and complete. Your account will be ready within 2-3 days.

Step 3: Call your 401(k) provider

While some providers allow direct 401(k) rollovers, our experience says most do not and it is often quicker and easier just to call them. Here’s what this looks like:

• Call Provider Together: We need to call them together so that you can authenticate yourself as the owner of the account and authorize me to speak on your behalf. I will handle most of the conversation from here.
• Confirm Direct Rollover: We will confirm with the plan provider that we are going to do a Direct Rollover into accounts held at Schwab. They will typically ask for the account numbers which I will provide.
• Review Plan Details: They will typically provide you with a summary of your current plan balances, an estimate on timing to receive the funds, and other information. I’ll write all this down and can provide you the summary if you’d like.
• Confirm Distribution Process: We found about half of providers will send the check directly to Schwab which requires no additional work from you. The other half will send you a check directly which then needs to be sent to Schwab. If this is the case, we will send you a stamped envelope along with a note to Schwab that provides some additional instructions to them. All you need to do when you receive the check is put it into this envelope and drop it in the mailbox.

Step 4: Confirm funds received

We will monitor your account with Schwab and let you know once they have received the funds or if there are any additional steps that require your attention. Funds typically arrive within 7-10 business days of checks being sent out.

Once the funds have been received, we will then invest them according to the investment strategy we have aligned on with you.

The fine print

This process describes how Kangpan & Co. typically handles 401(k) rollovers for clients; individual provider requirements and timelines vary.

It’s important to note that rolling over a 401(k) is not always the right choice. Some employer plans have lower costs or unique investment options (e.g., stable value funds) not available outside the plan.

Nathan
Founder & Lead Advisor
[email protected]

Kangpan & Co. is a flat-fee financial advisory firm specializing in helping mid-career professionals navigate the career, family, and financial tradeoffs that come with this stage of life. This content is for educational purposes only and is not financial, legal, or tax advice. Consult a licensed advisor for help with your individual situation. Employees and clients of Kangpan & Co. may hold positions discussed in our content. Past performance is no guarantee of future results.