Jae Bratton
Appearances
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
And whenever I go to withdraw those funds in retirement, I will have to pay taxes on that money then.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
It was direct. And that means that I did not have to pay any financial penalty on this.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
I don't have experience doing an indirect rollover, so I can't really compare. But I would just say overall, the experience was fairly easy just because I had the assistance of this particular service to walk me through it.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
As I mentioned earlier, I initiated this rollover process in 2022 right when I had been hired at NerdWallet. I knew that I was going to have a retirement account with NerdWallet 401k, and I knew I had these two other retirement accounts just hanging out in the ether. I didn't want just three retirement accounts in separate financial institutions.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
So in 2022, I just decided now is the time to streamline everything. Come our retirement, I didn't want to be hunting down retirement accounts at X number of financial institutions. I want that time to be for leisure. There is a financial component behind the motivation to roll over. I wanted to move that money from those old accounts and invest them into mutual funds of my choice.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
Definitely. But before I do that, I want to go back to something that Sarah was saying. Sarah was talking about how her process of rolling over some of her old retirement accounts was not as easy as maybe my experience. And I want to say that mine was maybe a little bit easier than hers and maybe other people's. listening because I only was rolling over two accounts.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
I mentioned this before, but I used a service to help walk me through that process. And also, like Sarah, I had a baseline knowledge of a retirement account. So I say all that to say... Mm-hmm. I don't want to put out this impression that rolling over retirement accounts is easy. It's not. It is a complicated process made easier by some services.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
So I don't want the listeners to think this is something that I can do in 15 minutes. And it's not. The task of rolling over retirement accounts, I mean, we don't have to do it, but there are benefits, which I will talk about. This is just another example of how the onus is on us to make sure that we are making all the right decisions to safeguard our future in retirement.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
The first one I've already mentioned before, but it's worth repeating again, because this is probably the main motivation for many people doing rollovers. And that is just simply simplicity. For people who have held multiple jobs like myself, that's reason enough. Many of us are going to have many jobs in our lifetime before we get to retirement.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
And without rolling over those accounts, you'll have to pull money in retirement from multiple pots. And I just wanted mine in one big one. The second draw for rolling over retirement accounts is financial security. Many of us have had multiple jobs.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
And the more jobs we have, we're increasing the likelihood that we'll forget about that 401k that we've had with an employer we had 20 years ago and definitely don't want to forget about that money.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
And lastly, I would say that your 401k with an employer usually has limited investment options that are pre-selected by that employer. If you're not satisfied with those investment options or the fees attached to those funds, one way to get around that is to roll over your retirement funds into an IRA where you have much more freedom to select the investments that you want.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
I would just say, if you're considering a rollover, speak with your particular retirement plan custodian and ask them to help you roll over the money in a way that won't incur any financial penalties.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
That's right.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
Thank you for having me.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
The year is 2022. I had just been hired by NerdWallet, and I decided that it was time to get all of my retirement accounts from my former employers into one. I had two old ones from, like I said, two previous employers, and I wanted to move them into one financial institution, the one that was already holding my husband's and my Roth IRAs.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
I used a service which facilitates the rollover process for free. And even though I didn't need this particular feature, it also helps you find old 401ks that you may have forgotten about.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
Right.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
The first rollover, I would say, was a little bit more straightforward. I moved about $21,000 from a Roth 401k from a former employer into that Roth IRA that I said I had already had at that particular financial institution. I was able to roll that $21,000 in my old Roth 401k into my current Roth IRA because both investment accounts are after tax.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
And that just means I had already paid tax on the contributions. And the big benefit of that is I get to make withdrawals and retirement tax free. Now, when you do rollovers, it is possible to roll over a traditional 401k into a Roth IRA, but you will have to pay taxes. Accounts have to be tax compatible if you want to avoid paying penalties.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
Exactly. I was able to grow the balance in my Roth IRA while still playing by the rules that govern annual contribution limits. And the contribution limit for Roth IRAs is pretty low comparatively, especially like when you compare it to a 401k. That was just a nice perk.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
For the second rollover, again, from another former employer, this time I was moving about $25,000 from a 403B into a traditional IRA.
NerdWallet's Smart Money Podcast
Retirement Rollover Ready? Rules, Risks, and Rewards of 401k and IRA Transfers
Yeah, actually, the process was just as simple. Again, that service that I used facilitated the rolling over process and made it pretty seamless. The only difference is that in this particular rollover, my 403B was traditional, not a Roth, meaning I hadn't paid tax on those contributions yet. So I rolled over the money from the 403B into a traditional IRA, not a Roth IRA.