How to Open a Rollover IRA (VIDEO)

Posted by Laura Adams on Jan 17, 2012 in Blog, Retirement, Video | 3 comments

Here’s one of the worst financial mistakes that I see people make: Leaving retirement money with an old employer.

If you abandoned an old workplace retirement plan—like a 401(k) or a 403(b)—you should rescue it as soon as possible by rolling it over into an IRA.

Keep reading to find out why you should complete a retirement rollover, how to do it, and several places to open up your new account.
 

5 Reasons to Rollover an Old Retirement Account

Here are 5 reasons why doing a retirement rollover is smart:

1. You should control your retirement money.
   If you leave your retirement funds with an old employer they can make changes to the retirement plan that might not be in your favor.

 

2. You should have investment freedom.
   If you leave your retirement funds with an old employer, you’re limited to their menu of investment choices.

 

3. You should simplify your financial life.
   Many people change jobs every few years. Having multiple retirement accounts at one or more old employers is a hassle.

 

4. You don’t want to depend on an old employer.
   No matter if you left an old job on good or bad terms, the benefits department cares more about serving current employees than past ones.

 

5. You should contribute to your nest egg.
   If you leave retirement funds with an old employer you’re prohibited from making any new contributions.

 

How to Open a Rollover IRA

Are you procrastinating a 401(k) rollover because you’re not sure exactly how to do it? Just follow these 3 simple steps:

Rollover Step #1: Open an IRA

If you don’t already have an IRA, you’ll need to open one. There are many good accounts, but here are 3 that offer different kinds of benefits:

• Betterment- This is one of the easiest places on the web to invest in either a regular brokerage account or an IRA. You simply use an online tool to show whether you’re really conservative or like risk, and Betterment recommends a simple portfolio of funds tailored for you.Check out the step-by-step video tutorial below where you can watch me open a Betterment IRA.
  

 

• E*TRADE – This is a brokerage where you can invest in a regular account or an IRA and choose from thousands of traditional investments.

 

• LendingClub – This is a non-traditional peer to peer lender that brings borrowers and lenders together. You can make investments in a regular account or through a self-directed IRA.

 
Rollover Step #2: Request a Rollover

Once you open your rollover IRA, simply complete the paperwork for your rollover distribution. You can get it from your online retirement account or request it from the account custodian or benefits administrator.

Opt for a “direct rollover” where the funds are NOT made payable to you, but to your new rollover IRA. Find out exactly how the distribution should be made payable.

Rollover Step #3: Deposit Your Rollover Distribution

After you receive your rollover distribution check you have 60 days (including weekends and holidays) to deposit it in your new IRA–so don’t delay! If you don’t meet this important deadline, the distribution will be treated as an early withdrawal and will be subject to taxes plus an additional 10% penalty if you’re younger than age 59-1/2.

Watch this short video about how to open an IRA:

 

To learn more about Betterment, watch the webinar replay of “5 Things You Should Do With Your Money Now!”:

To open your regular investing account or IRA and receive a $25 account bonus, click here to learn more about Betterment!