Dear Liz: I lost my job earlier this year. I think I will soon be expected to take the money that was in my 401(k) account—nearly $70,000–and put it elsewhere. I know I need to be sure the check is not payable to me personally, and I think I need a custodian (is that the right word?) which I think would be a bank. I don’t have a clue how to proceed or even to investigate my options. Can I just walk into any bank and handle it, or do I need to find a specialist? If I need to find a specialist, where do I look? Are there any pitfalls that I need to beware of? Thank you, I’ll appreciate any guidance you can offer.
Answer: Take a deep breath. There are a few steps involved, but this isn’t rocket science.
First of all, understand that you may not need to do anything with the money. Some employers allow you to keep your money in their plans even after you leave, although others will require you to move it. Call your former company’s human resources department and ask about your options.
If you are required to move the money, you’re correct that the money should transferred directly to an individual retirement account custodian, which can be any bank, brokerage or mutual fund company that offers IRAs.
You want to transfer the money directly so that 20% of the money isn’t withheld for taxes.
Any IRA custodian you contact will help you with the paperwork and the transfer. Consider contacting a discount brokerage or mutual fund company, since these tend to charge lower fees than banks and full-service brokerages. Some companies to check out include The Vanguard Group, Fidelity Investments and T. Rowe Price.
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