Capitalize Review 2022: A Free Assist With 401(k) Rollovers
- Free service
- Saves hassle and taxes
- Step-by-step guidance
- Finds orphaned or forgotten retirement accounts
- No phone customer service
- Limited to 401(k) and 403(b) IRA rollovers
- Needs sensitive personal and financial information
Capitalize is a free web-based service that can assist a user with a 401(k) or 403(b) rollover to an IRA. This service is useful for anyone planning a retirement rollover and not wanting to deal with the phone calls, messages, paperwork, loss of time and uncertainty of doing it all on their own.
The company charges no fees or subscriptions but earns commissions from IRA partners. These partners are the ones who help Capitalize users, serving as their IRA managers.
Users aren’t bound to a Capitalize partner for their rollovers and are free to go with another company if they want. The platform does not handle rollovers to new 401(k) or 403(b) accounts.
How Financial Tools For Retirement Investing Typically Work
Three important vehicles for preparing for the financial future are the Individual Retirement Arrangement — commonly known as an IRA — the 401(k) and the 403(b).
An IRA is used by individuals as a tax-advantaged retirement savings account. The individual is responsible for selecting the manager who handles the account, which can hold stocks, bonds, mutual funds, cash and other assets.
The 401(k) is an employee benefit, offered by companies as a way for their workers to save money. A 403(b) is a similar savings plan for employees of schools and religious and tax-exempt organizations. The employer chooses the manager, and the individual has less control over the assets than in an IRA.
How Capitalize Works
If an employee leaves a job, an important decision must be made on what to do with the 401(k). The account can’t travel, since the new employer will have their own retirement account manager, but the money and investment assets can.
Once a user registers with the Capitalize site, they simply need to identify their former employer. If the user doesn’t know or isn’t sure about who’s managing the 401(k) account, Capitalize will be able to search its own database or have a representative call the former employer to collect the information.
Capitalize works for any employee who’s changing jobs and transferring their assets to a new or existing IRA account.
Choosing a New Money Manager
A big part of this process is selecting an IRA custodian, the entity that maintains the account and follows instructions by the account owner on how to manage it. Capitalize offers information on traditional, Roth, and self-directed IRA managers, and explains how these IRA types differ.
The Capitalize website does offer guidance on selecting an IRA manager. By asking a series of questions about users’ preferences, Capitalize directs them to a list of options, allowing a comparison of fees, investment options and other features. Once an IRA provider is selected, Capitalize will assist with opening the new account.
Capitalize partners include big names in investment brokerages, including Schwab, Vanguard, Fidelity, TD Ameritrade, Merrill Lynch and SoFi, among others. Going with a major national brokerage should offer some peace of mind over the issues of security, accessibility and customer service. But the IRA doesn’t have to be with a Capitalize partner, and there’s no fee charged by Capitalize either way.
The whole process should take at most a few weeks, and usually is much quicker. At any time, the user can contact Capitalize or the IRA provider to track the status. Interruptions, delays, and problems can arise, of course, and it’s helpful to have an outside party following the rollover and providing advice if needed.
Good To Know
Many workers face the choice of moving their savings to an IRA, which they own as individuals, or a 401(k) or 403(b), which are managed by the employer’s choice of bank or financial company. The IRA typically allows more control over the assets, while employer-sponsored accounts leave investment options and activity largely up to the manager.
Capitalize is a free web-based service that can assist a user with a 401(k) or 403(b) rollover to an IRA. The company charges no fees or subscriptions but earns commissions from IRA providers for bringing them new clients. The platform does not handle rollovers to new 401(k) or 403(b) accounts.
The user may select a Capitalize partner as their new IRA manager. They’re also free to go with another company.
There are several important factors involved when doing a rollover. Uppermost is the possible tax penalty imposed on the process by the IRS.
The federal tax agency must be notified of any rollovers and will impose a fee on rollovers that aren’t completed within a certain timeframe. The IRS might also tax a rollover that goes into a Roth IRA, which unlike a traditional IRA does not allow a tax deduction on new contributions. In the case of a traditional IRA, there should be no tax or withdrawal penalty involved.
With people changing jobs more frequently, rollovers have become pretty commonplace. But it’s not unusual to get snagged on the details and procedures. Capitalize was designed to save users that headache and ensure there won’t be any tax payments due.
Many workers with 401(k)s have trouble moving their savings when they change jobs. By Capitalize’s own estimate, about 25 million 401(k) accounts are “orphaned,” meaning they’ve been essentially forgotten by their owners after changing jobs.
In some cases, the employer changed 401(k) providers, while in others, the company was bought out and its employees’ savings were moved to a new provider.
It’s also possible that a balance of less than $5,000 was moved, without the employee’s knowledge, into an IRA at another provider. This is known as a forced rollover and is allowed when an employee does not indicate a choice of a new 401(k) provider. A forced rollover can mean a big loss to the account owner when fees are factored in.
Capitalize assists users by searching for any forgotten 401(k) accounts, whether they’re still active or not. These assets can be consolidated into the new IRA.
Security and Customer Service
Of course, in signing up for Capitalize users have to work with a third party in the rollover transaction. Security in any web-based financial transaction is an important concern.
Capitalize reports that it is SOC 2 compliant. This reporting method, developed by the American Institute of CPAs, notes the security protections and compliance by third-party vendors used by organizations for their financial services.
In addition, Capitalize claims to use bank-level encryption to protect the financial and personal data of its users. It will ask for some personal information during the process, including age, gender, country, home address, e-mail address, phone number and date of birth. Capitalize also requires information about financial accounts, including access to these accounts through passwords and password hints.
Capitalize provides customer service in the form of a chatbox, by email, or via a contact form on the web page. There’s no direct phone link, however.
Comparable Rollover Options
Capitalize was founded in 2019 by Gaurav Sharma and Christopher Phillips and provides 401(k) rollover assistance on a scale that is otherwise unavailable. Other platforms, such as Schwab, Merrill, TD Ameritrade and Fidelity, offer information and some assistance in transferring funds to accounts with their companies.
The internet also offers plenty of informational sites on the subject of rollovers, and books by financial gurus such as Suze Orman and Dave Ramsey can guide readers on their options in handling retirement funds. However, Capitalize makes it possible to personalize and compare rollover options from one place.
Capitalize: Great for Those Comfortable Making Financial Decisions Online
It isn’t necessary to use Capitalize or any other third-party financial consultant to carry out a rollover. It can be done with the help of an employee benefits manager or through contact with the financial institution selected to handle the new account.
But the DIY version of a rollover involves filling out forms, mailing paperwork, checking old and new account statements and keeping on top of the process as it unfolds — usually over the span of a week or more. Aggravating and unexplained delays are common when life savings are moved from one unknown handler to the next.
Capitalize promises to ease that process. It’s attractive for users who are comfortable making an important financial decision online and allowing a web-based company to handle the details.
Frequently Asked Questions
- If someone just needs information on retirement accounts, can Capitalize help?
- Any employee considering a rollover can learn quite a bit about the process with a visit to the Capitalize website. There are thorough and extensive FAQ sections on the company, as well as informational articles on 401(k)s, IRAs, taxes, and other relevant financial subjects under the Learn tab.
- Capitalize also provides information on current and trending retirement topics such as cryptocurrency assets, 401(k) fees, and backdoor Roth IRAs, which happen when traditional IRAs are converted to Roth IRAs.
- What if someone has more than one 401(k)?
- With a comprehensive list of 401(k) providers, Capitalize can find old 401(k)s along with any currently open and active ones, consolidating them into a single IRA that's easy to track and manage.
- Why not just let any new IRA manager handle a rollover?
- Financial management companies have a wide range of products and services, and their primary interest is gathering the maximum amount of assets to manage – a possible sales incentive for any new IRA manager. Capitalize specializes in a specific transaction, and can attend to this function without regard to the size of the account.
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- Internal Revenue Service. "Individual Retirement Arrangements (IRAs)."
- Internal Revenue Service. "Rollovers of Retirement Plan and IRA Distributions."
- Internal Revenue Service. "Topic No. 413 Rollovers From Retirement Plans."
- Charles Schwab. "Roth IRA vs. Traditional IRA."