Can You Transfer 401k to Brokerage Account and Combine Retirement Savings

You can transfer your 401k to a brokerage account, but it's not a simple process. It requires a few steps and some planning to make sure you're making the right decision for your financial future.

The IRS allows you to roll over your 401k to an IRA or another employer's 401k plan, but you can also transfer it to a brokerage account. This can be a good option if you want to have more control over your investments.

Before you start the transfer process, you'll need to choose a brokerage account that accepts 401k rollovers. Some popular options include Fidelity, Vanguard, and Schwab.

You have four options for rolling over employer-sponsored retirement plan assets, and it's essential to consider each one carefully.

You can leave the assets in the old plan, but know that you won't be able to add additional funds to this account, and you'll be subject to plan management or administration fees.

Cashing out your assets before age 59 ½ is a bad idea, as it'll be subject to income taxes and a 10% early withdrawal penalty tax.

You can roll over the assets to your new employer's plan, which might offer reduced fees and costs, and you can generally continue contributing.

Rolling over the 401(k) to an IRA is another option, allowing you to continue saving for retirement, but you won't be able to take a loan against your assets.

Here are the four options in more detail:

You've decided to transfer your 401k to a brokerage account, and now you're wondering whether to do a direct or indirect rollover. A direct rollover is the easiest way to move money between retirement plans/accounts, and it's nontaxable if processed correctly.

You can do a direct rollover by having your former employer make a distribution payable to the custodian of your IRA for credit to your IRA. This means you won't have to worry about taxes or penalties.

A direct rollover is an electronic transfer from your old account to your new account, or a check made out to your new account. The money is not paid directly to you, so it cannot be counted as taxable income for the year.

Here are the key differences between direct and indirect rollovers:

An indirect rollover means the distribution gets paid directly to you, and you have 60 days to deposit the funds into your IRA. If you fail to redeposit the full amount within 60 days, it may be considered a taxable distribution unless an exception applies.

To get started with transferring your 401(k) to a brokerage account, you'll need to gather some essential documents.

Start by selecting your rollover method in the app, which can be found under Retirement → Menu or Settings.

Collect your most recent 401(k) and IRA statements, making sure they're less than 90 days old.

You'll also need to collect online rollover or transfer forms and contact information from your brokerage company or previous employer.

To avoid paying unnecessary taxes, ensure that your 401(k) accounts are rolled over directly to the brokerage company.

Here are the steps to initiate a direct rollover:

You can transfer your 401(k) to a brokerage account, but it's not a direct transfer. You'll need to roll over your 401(k) to an IRA first, which can then be transferred to a brokerage account.

There are two types of rollovers: direct and indirect. A direct rollover is an electronic transfer from your old account to your new account, or a check made out to your new account. This is the safest approach, as it doesn't involve you taking possession of the funds.

To initiate a direct rollover, you'll need to contact your plan administrator and request a direct rollover. They'll require specific information, such as the name and account number of your new IRA, to ensure the transfer is done correctly.

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You can also use a rollover marketplace, such as RolloverCentral or Capitalize, to help facilitate the process. These services work with plan providers to allow eligible employees to directly rollover employer-sponsored retirement plans to a new or existing IRA.

Here are the steps to initiate a direct rollover:

If you're not eligible for a direct rollover, you may need to do an indirect rollover. This involves taking possession of the funds and then depositing them into an IRA within 60 days. However, this option requires you to pay taxes on the transfer, which can be a disadvantage.

To complete an indirect rollover, you'll need to:

It's essential to note that indirect rollovers can be complex and may require additional steps. It's recommended to consult with a financial advisor or tax professional to ensure you're following the correct procedures.

The rollover process can be completed in the following steps:

1. Set up or use the applicable IRA in Robinhood

2. Contact the plan admin of the 401(k) or other employer plan to request a direct rollover

3. Provide the necessary information for the transfer

4. Choose your rollover method in the app (e.g. Robinhood)

5. Select the account and dollar amount to transfer

6. Review and select Contribute to complete the rollover

By following these steps, you can successfully transfer your 401(k) to a brokerage account and continue saving for retirement.

A unique perspective: Is Robinhood a Brokerage Account

You have four options for what to do with your 401(k) when you leave a company: leave it in the old plan, roll it into the new plan, direct or indirect rollover to an IRA provider like Robinhood, or cash it out.

Leaving your 401(k) in the old plan means you'll have limited investment choices and possible account maintenance fees.

If you roll your 401(k) into your new employer's plan, you may have limited investment choices and possible account maintenance fees.

For more insights, see: Brokerage Account Fees

Direct or indirect rollover to an IRA provider like Robinhood has its own set of limitations: you can only do a cash rollover, and Robinhood doesn't reimburse fees associated with rollovers.

Cashing out your 401(k) is not recommended, as it can lead to complications and potentially limited investment choices.

Here are some key considerations when deciding which option is best for you:

Ultimately, the best option for you will depend on your individual financial situation and goals.

Consolidating 401(k)s can help you lower administrative fees. This can save you money in the long run, as you won't have to pay fees on multiple accounts.

Lowering administrative fees is just one of the many benefits of consolidating your 401(k)s. You can also view your portfolio holistically, which means you'll have a clear picture of your investments in one place.

Viewing your portfolio holistically is especially useful if you have multiple 401(k) accounts from previous employers. It allows you to see the big picture and make informed decisions about your investments.

Related reading: Fidelity Brokerage Account Fee

Here are some benefits of consolidating your 401(k)s:

To get started, gather your most recent 401(k) and IRA statements. These statements should be less than 90 days old to ensure a smooth transfer process.

You have four options for what to do with your 401(k) when you leave a company: leave it in your former employer's plan, roll it into your new employer's plan, direct or indirect rollover to an IRA provider, or cash it out.

Leaving your 401(k) in your former employer's plan or rolling it into your new employer's plan can be convenient, but it may come with limited investment choices and possible account maintenance fees.

If you choose to roll over your 401(k) to an IRA, you'll have more control over your money and a greater number of investment options. IRAs often have lower fees than company 401(k) plans.

Some common IRA fees to consider are potentially limited investment choices and possible account maintenance fees.

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You can choose from a variety of assets in an IRA, including stocks, bonds, certificates of deposit, mutual funds, exchange-traded funds, real estate investment trusts, and annuities.

Here are some common IRA assets:

Some IRAs, such as self-directed IRAs, even allow for alternative investments like oil and gas leases, physical property, and commodities.