Transitioning between jobs can be a trying time in your career, even when it’s a change for the positive. Such a transition might require some serious adjustments to your life. However, in the midst of all this, there’s one change you shouldn’t forget: rolling over your 401k.
Failing to roll over your 401k could make things more difficult later on. Luckily, the process of rolling over your Merrill Lynch 401k is abundantly simple in most cases.
Here’s a look at what you need to do to execute a successful 401k rollover.
Step 1: Determine Your Best Option
A 401k rollover isn’t always the best idea as your personal financial situation might differ from others. Take the time to explore your options and consider the consequences of each.
You have five basic options for what to do with your old 401k: leave it in the same account, combine it with a new 401k account, roll it over into a traditional IRA, convert it to a Roth IRA or simply cash it out.
Leaving it be requires the least work, but you won’t be able to make contributions to the account anymore. Keeping track of multiple retirement accounts can get difficult as well.
Combining your old 401k with a new 401k account is also a good option, but you might end up paying more in fees or have fewer options for investment products with your new provider.
Rolling over to a traditional IRA makes sense for many people, but you can’t borrow against your IRA. IRAs also have fewer legal protections from creditors than a 401k.
Converting to a Roth IRA can mean greater flexibility with your income in retirement, but it also means paying taxes on your retirement savings as part of the conversion.
And cashing out might seem like an attractive option, but you’ll pay a big chunk of that money in taxes and penalties.
Step 2: Open a Rollover Account
Ensure that your new retirement account is set up and ready to receive funds prior to beginning the rollover process. If it’s 60 days or more between when you receive the funds from your old 401k and deposit them in your new rollover account, the transaction is treated as a withdrawal and you’ll owe a stiff tax penalty.
Additionally, the company managing your new account can be a valuable resource for conducting the rollover. Representatives should be eager for your business, so you can expect them to be happy to offer you support in completing the transaction — and potentially offering up perks to try and attract your account.
Of course, if you’ve been happy with Merrill Lynch, consider opening a rollover IRA there. The Merrill Edge Rollover IRA comes with specialists available by phone 24/7 to help you with the rollover process.
Step 3: Contact Merrill Lynch
Call a representative at Merrill Lynch or visit the website to begin the Merrill Lynch 401k rollover process. This is a fairly standard process, but be sure that you specify that you want a “direct rollover,” or one that sends your savings directly to your new account.
In an “indirect rollover,” you’ll receive the funds and then deposit them in the new account yourself. This comes with a variety of other tax implications that could cost you.
Step 4: Report it On Your Taxes
While a direct rollover doesn’t incur any additional taxes, you’ll still need to report the transaction to the IRS. You should receive a 1099-R from Merrill Lynch, which you can then present to your tax professionals or enter yourself if you’re self-filing.
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