1375: Why I Did A 401k Rollover After Leaving My Job (and How I Did It) by Andy Hill of Marriage Kids and Money01k Rollover After Leaving My Job (and How I Did It) by Andy Hill of Marriage Kids and Money

[00:00:00] This is Optimal Work Daily, Episode 1375, Why I Did A 401k Rollover After Leaving My Job and How I Did It by Andy Hill of Marriagekidsandmoney.com Hey there! I am Dan, I am your host, and I am with you every single day, including weekends like today.

[00:00:18] And today we are going to be hearing from a brand new author for this show, so without further ado, let's turn our attention to the work of Andy Hill as we optimize your life.

[00:00:32] Why I Did A 401k Rollover After Leaving My Job and How I Did It by Andy Hill of Marriagekidsandmoney.com In 2014, my wife Nicole and I both started new careers. She moved from corporate recruiting

[00:00:47] into the role of stay-at-home mom when our son Calvin was born. I moved to a new marketing agency to advance my career in account management. After Nicole and I partnered together to pay

[00:00:58] off all of our debt, this single income life was something we were prepared for. It wasn't an easy financial change, but it was completely worth it in our opinion. With those new role changes,

[00:01:08] we not only left old jobs behind, but we also left old 401k accounts behind as well. Since we both had been at our previous jobs for a while, the idea of rolling over our 401k

[00:01:19] accounts was new to us. We heard that we were definitely supposed to do the rollover immediately, but we didn't really know why. Following the supposed to advice, I decided to move forward with rolling over both of our 401k accounts into IRAs. There have been times where I've looked

[00:01:35] back on some of the financial moves I made in my 20s and 30s, and I shake my head in disappointment. This was not one of them. I'm so glad we decided to roll over the 401k accounts.

[00:01:46] When I look back on the few hours of work I put into this rollover process, here are the reasons why I'm happy I listened to the supposed to crowd. 1. Lower fees

[00:01:57] I found that the fees associated with my previous 401k were much higher than the fees in my IRA. 1% here and half percent there might not seem like a lot, but after doing some calculations, I now understand the real impact that fees can have on my retirement savings.

[00:02:13] 2. No additional 401k contributions After moving to my new company, I realized something about my old 401k. I couldn't contribute to it anymore. Without my former company 401k match and the ability to contribute to it on a regular basis, this account wasn't going to grow very much.

[00:02:31] It was time to roll that sucker over. 3. Simplify the portfolio Another major benefit of rolling over the 401k accounts was the simplification that came with our updated portfolio. Before we did the move, Nicole's 401k was with JP Morgan,

[00:02:47] my 401k was with Lincoln Financial, and our IRA accounts were with Fidelity. It was just too many accounts with too many different partners. When we rolled over the 401k accounts, all of our funds now resided in the same place.

[00:03:00] Talk about stress reduction. I could log into one account and view our entire portfolio in one spot. It felt good to have our finances all neat and tidy. I had a better idea of our future plans, overall growth and diversification breakdown. 4. Better preparation for my family

[00:03:18] Having all of our investment accounts in one spot was definitely a stress reliever for me. I also thought that this new organized account situation would be helpful for my family in case I was to unexpectedly pass away. Understanding where all our retirement

[00:03:32] accounts are located would be one less problem Nicole would have to deal with. With my life insurance, last will and testament, and now my consolidated retirement accounts in one place, I felt like I had all of my financial docks in a row for my family.

[00:03:46] 5. How I rolled over my 401k If you're feeling like rolling over your 401k makes sense, consider consulting with a financial professional to help with the process. There are right ways and wrong ways to go about

[00:03:57] the process and you want to make sure you have zero errors, especially when it comes to your life savings. That all being said I decided to go through the process myself and it really wasn't that bad. Here's how I rolled over my 401k and Cole's 401k.

[00:04:13] 1. Establish a rollover IRA If you don't already have a relationship with another brokerage firm, consider Vanguard, Fidelity or Schwab. These companies all have excellent low-cost index fund options for you to choose from. Since Nicole and I were already partners with Fidelity, this part was easier for us.

[00:04:32] We opened a rollover IRA account with Fidelity and this allowed us to not pay any taxes or any penalties on the rollover. 2. Perform a direct rollover I then touched base with my previous employer and let them know that I'd like to roll over

[00:04:46] my 401k to an IRA. My former HR rep provided me with the appropriate paperwork to fill out and instructions on delivering the documents to the 401k provider, Lincoln. I asked for a direct rollover. Those two words were very important to the process. This indicated that I did not

[00:05:04] want to receive the money, big no-no, and I wanted it to directly roll over to Fidelity. 3. Do not cash out All caps, exclamation point I made sure not to cash out my 401k. By cashing out I would have been hit with an

[00:05:20] immediate 10% early withdrawal penalty. Additionally, I would have had to pay taxes, given that my 401k investments were made pre-tax. By cashing out, I would have had an approximate 40% cut to my money immediately. Ouch! Warning, more exclamation points and caps

[00:05:37] are coming with the next step. 4. Do not have the check written in your name When I was communicating with my previous 401k provider, I made sure the checks were written to Fidelity and sent directly to Fidelity. If the check is accidentally sent to you,

[00:05:53] make sure you get it over to your new brokerage partner as soon as possible. There are penalties for not having the funds allocated quickly enough. You can also do a trustee-to-trustee transfer that helps make this process smooth. 5. Wait for rollover IRA time Tick tock tick tock

[00:06:11] After I initiated the rollover process, my 401k money appeared in my rollover IRA account about 7 business days. When I rolled over into Kohl's 401k, I needed to wait an additional 4 business days for the funds to be quote-unquote collected before I could convert it. As Heinz

[00:06:27] used to say, good things come to those who wait. 6. Convert to a traditional IRA After the funds were collected in my 401k account, I worked with Fidelity to convert my rollover IRA to a traditional IRA. By the way, Fidelity was extremely helpful during

[00:06:44] this whole process. It made the rollover a lot easier. With my traditional IRA, I continued to invest pre-tax just like my previous 401k. I wanted to take advantage of investing pre-tax to get a tax deduction for my annual contributions. 7. Decide your investment direction

[00:07:02] After losing faith in my previous financial advisor, I decided that I would try to manage my own retirement investing for a while. If you don't feel comfortable managing the investments within your IRA, working with a true professional is a smart move. I'd recommend

[00:07:16] seeking out a fee-only certified financial planner or CFP that is a fiduciary. When someone's a fiduciary, that means they have committed to working in the best interest of their clients. Believe it or not, not all financial advisors are fiduciaries. Shocker, right?

[00:07:31] Or if you're a game to manage your own portfolio as I did, that can easily be done with the right know-how and research. Index funds are an excellent place to start.

[00:07:40] After reading Money, Master the Game by Tony Robbins and The Simple Path to Wealth by J.L. Collins, I got an appreciation for the benefits of index fund investing and keeping my investments simple.

[00:07:55] You just listened to the post titled Why I Did a 401k Rollover After Leaving My Job and How I Did It by Andy Hill of MarriageKidsandMoney.com And thanks so much to Andy and let me tell you a little bit more about him.

[00:08:10] Andy Hill is the award-winning writer, speaker, and podcaster behind MarriageKidsandMoney, which is a platform dedicated to helping young families build wealth and thrive. Andy's advice and personal finance experience have been featured in major media outlets like Business Insider, MarketWatch, Kiplinger's Personal Finance, and NBC News.

[00:08:30] Trusted as a personal finance influencer and corporate financial wellness speaker by global brands like JLL, Andy's message of family financial empowerment has resonated with listeners, readers, and viewers across the world. When he's not talking money, Andy enjoys

[00:08:45] wrestling with his two kids, singing karaoke with his wife, and watching Marvel movies. And you can come by MarriageKidsandMoney.com for so much more or you can check out our other podcast, Optimal Finance Daily to hear more from Andy. But that brings us to the end

[00:08:59] of this installment of OWD and as always, I thank you so much for being here with me and for clicking subscribe or follow. And I hope to see you again tomorrow where your optimal life awaits.