There is no mandatory deadline for transferring your 401 (k). Keep in mind that if you decide to make an indirect reinvestment, you will have 60 days to deposit the check into your new 401 (k) or IRA account. The transfer from a 401 (k) plan to an IRA takes 60 days to complete. Once you receive a 401 (k) check with your balance, you have 60 days to deposit the funds into the IRA account.
If you choose a direct custodian-to-custodian transfer, the transfer of your 401 (k) to an IRA can take up to two weeks to complete. You may be able to leave your money in a former employer's plan indefinitely, as long as the plan administrator allows it. However, if you decide to make a reinvestment, you must complete the process within 60 days if you receive a check for your retirement funds. If an employer contribution is on the way, you may want to complete the transfer after the last payment has been made so as not to close your account prematurely.
Whether you choose an IRA for your reinvestment or choose your new employer's plan, consider direct reinvestment, that is, when one financial institution sends a check directly to the other financial institution. The 60-day rule applies to indirect reinvestments and requires that you deposit funds into an IRA within 60 days of transferring funds from the 401 (k) plan. Like a reinvestment from a 401 (k) plan, you should be able to transfer your money through a direct reinvestment or through a manual transfer. Transferring a 401 (k) plan to a new employer is pretty simple: just call your old company's 401 (k) plan provider and request the transfer yourself, or your current employer's plan will do it for you.
The easiest 401 (k) plan reinvestment option is to ask the old plan administrator to transfer your balance directly to your new account. The proposed Treasury Regulation Section 1.408-4 (b) (ii), published in 1981, and IRS publication 590-A, Contributions to Individual Retirement Agreements (IRAs) interpreted this limitation to apply IRAs by IRA, meaning that a transfer from one IRA to another would not affect a renewal involving other IRAs of the same person. The money in your 401 (k) plan is paid before taxes, while contributions to the Roth IRA are made after taxes, so this conversion will allow you to add the money reinvested to your income taxes for the year you make the change. You can choose to leave the funds where they are, or you can transfer them to the 401 (k) plan at your new job or to an individual retirement account (IRA).
Reinvesting a 401 (k) plan into a Roth IRA changes the tax treatment of your money, which DOES cause a taxable event. Reinvesting a 401 (k) plan into a traditional IRA account does not cause any taxable event and your money will continue to be subject to deferred taxes. Section 408 (d) (B) of the Internal Revenue Code limits taxpayers to a transfer from IRA to IRA in any 12-month period. Nor can you make a transfer during this 1-year period from the IRA to which the distribution was transferred.
The one-year renewal rule of Section 408 (d) (B) of the Internal Revenue Code applies only to reinvestments.
