What is a Rollover & How Do They Work? with Joy & Sara W

Welcome to Financially Naked: Stories from the Financial Gym! In this episode, Certified Financial Trainers Joy and Sara W discuss the process of rolling over employer-sponsored retirement accounts to other investment accounts. From discussing the why's and how's of rollovers to highlighting the advantages of individual retirement accounts (IRAs), they guide listeners through the process of gaining more control and flexibility over their investments.

Joy and Sara W also delve into the nuances of the rollover process, offering insights into services like Capitalize and empowering everyone to take charge on their own. Whether you're considering a DIY approach, exploring Robo advisors, or seeking guidance from a financial advisor, Joy and Sara W provide valuable perspectives to make informed decisions. 

Podcast Notes

  • When you leave a job with a 401k, that account is housed in your old company’s plan. It’s good to make a plan for that money as soon as possible. 

  • In some cases, you can leave it where it is or roll it from an old retirement account to a new retirement account.  

  • When you’re ready to retire, you only have a few accounts to manage and plan from.
    The Gym’s recommendation is to move your money from an employer-sponsored plan into an individual retirement account (IRA) that you can manage on your own. 

IRA Benefits: 

  • There is much more control over an IRA than an employer-sponsored plan.

  • They are flexible and have more investment options. 

  • It can be helpful as you are managing your money throughout your career. When you leave a job, you have an IRA basket for everything. 

  • The costs associated with IRAs are traditionally lower than the employer-sponsored account if you’re no longer working there.   

What is the rollover process? 

  • Each institution has its own specific process but they tend to be slow. You can definitely manage it on your own, but it can be frustrating.

  • If you don’t want to do this process on your own, there are free services out there like Capitalize. They can take care of the process for you. They act as the middle people between obtaining the money and putting it in a new spot for free.  

  • It’s totally normal to procrastinate with this task. There isn’t a completely standard practice among institutions. It can feel like a daunting process. 

  • If you’re feeling analysis paralysis or decision fatigue, Capitalize is a great option. 

How to do it On Your Own 

Step 1: Find the money. 

  • To find old accounts, call your former HR department or login to your account if you have the credentials. 

Step 2: Decide where the money is going.  

  • It’s important to know which account the money is going to because you have 60 days to complete the transfer. 

  • Choosing an investment platform is similar to choosing a bank. They’re all pretty similar, so you can decide based on their website, reviews, or user experience. 

  • You are not married to this account forever, so don’t get stuck at this step. You can always switch in the future. 

Step 3: Fill out the paperwork & follow up!

  • You need to make sure that the money gets to where you want it to go. 

Step 4: Invest that cash

  • Once the money is where you want it to go, you need to make sure it is invested and working for you!

Choosing Where to Put The Money

DIY - You choose the investments yourself through the platform.  

  • Once you’ve picked an investment account, the next step is deciding what you want to invest in and actually investing the money. 

  • Without investing the money it’s just sitting in the account like cash. If it isn’t invested, it won’t get the benefits of being invested. 

Robo advisors - You answer a few questions and the money is invested automatically 

  • These can be a great option if making your own investment decisions feels intimidating. 

  • They will ask a few questions about your goals and invest the money based on those answers. 

  • It’s a low barrier to entry and a simple set up. These are a great way to get started and get into the habit of investing. 

Financial Advisor - You work with a real human who manages your money for you

  • You’re paying for their professional advice and to stay on top of your investments.  

  • You have to find someone you jive with and want to be on the journey and strategize with you. 

If you want to work with a Certified Financial Trainer to discuss the rollover process, schedule a free warm-up call today! If you have any ideas or questions for the show, send an email to trainerpodcast@fingyms.com.

Resources

Meet The Trainers

Meet Joy Liu - Level 2 Certified Financial Trainer 
Meet Sara Willi - Level 2 Certified Financial Trainer 

The Financial Gym Team Comment