How to Roll Over Your 401(k) to E*TRADE

E*Trade from Morgan Stanley (E*Trade Securities) offers flexible retirement investment accounts, low transaction fees, and the ability to manage all of your retirement assets under one roof.

A 401(k) rollover allows you the flexibility to move your retirement account from a former employer to a new employer-sponsored plan.

It’s essential to know your investment options — and make the best investment choice — for a fruitful retirement.

How to Rollover your 401(k) to E*Trade: 5 simple steps

Here is a step-by-step guide on how to roll over a 401(k) into an E*TRADE IRA :

Confirm a few key details about your 401(k) plan

Make sure you’re eligible to roll over your existing 401(k) plan. From there, you’ll need to make sure your 401(k) tax status is the same as the IRA you plan to move the funds into to avoid a costly penalty. For example, a tax-deferred traditional 401(k) should be moved into an IRA, whereas an after-tax Roth 401(k) should be moved into a Roth IRA.

Decide where to move your money

If you choose to move your 401(k) account balance into an IRA at E*TRADE, make sure you have the account number of that IRA handy. Note that if you don’t yet have an IRA account, you will need to open an account first.

Contact your 401(k) provider to authorize the transfer

You’ll need to reach out to your 401(k) provider to authorize the transfer of your 401(k) funds into your new account.

Get a check in the mail and deposit it into your new account

Make sure you understand the differences between an indirect and a direct rollover. Depending on what type of rollover, you’ll have different instructions to complete the process. At a high level, you’ll need to make sure you receive the 401(k) funds in the form of a check and deposit them into your new IRA account.

Make sure your funds are invested properly

It’s likely best to speak to a financial advisor to help you make your investment allocations.

Get Help Managing Your E*TRADE 401(k) Rollover

Rollovers can be tricky and confusing. With Capitalize, you have a trusted partner who can manage the complexities of 401(k) rollovers completely for you. Check out how we can help you here.

Understanding the options for your retirement plan

In addition to rolling over your 401(k), there are additional options to consider that may offer positive growth potential for your retirement savings.

Roll Over to an IRA account

Transferring funds from a 401(k) account to an IRA enables you to monitor your retirement savings effectively — and at a provider of your choice. You are the official accountholder, and the funds will end up under your administration (not your previous employer’s).

When you move your 401(k) into a rollover IRA, you’ll preserve the tax-deferred status of the account and avoid income taxes and/or early withdrawal penalties.

Roll Over Your Existing 401(k) Into A New 401(k)

Known as a 401(k)-to-401(k) rollover, you may be able to roll over your retirement plan assets from a previous employer plan to a new employer’s qualified retirement plan. This is helpful if you’re happy with the new investment provider’s investment types and account fees.

401(k) account transfers may not be possible if your new employer does not offer a 401(k), or if they don’t allow roll-ins from outside plans.

Check with your current plan administrator or financial institution to find out your eligibility.

Cash Out Your 401(k)

Withdrawing from your 401(k) plan can result in large early withdrawal penalties as well as income tax. You will also lose out on the tax-deferred growth of your retirement plan assets, which can be especially costly in the long run.

Depending on your circumstances, try to avoid cashing out your 401(k) unless absolutely necessary.

FAQs:

• What are the main benefits of rolling over a 401(k)?
  When rolling over a 401(k), you gain access to a wider range of investment options. Additionally, rolling over a 401(k) can potentially help you lower your fees and may also provide estate planning benefits.

• What is a traditional IRA?
  A traditional IRA (Individual Retirement Account) is a type of retirement savings account that offers certain tax advantages. It allows individuals to contribute pre-tax income, meaning the contributions are (usually) tax-deductible in the year they are made.On the other hand, a Roth individual 401(k) is a retirement savings plan offered by some employers that allow employees to contribute a portion of their income on an after-tax basis, similar to a Roth IRA.Withdrawals from IRAs will be reported on IRS Form 1099-R, though not all withdrawals will be considered taxable (particularly qualified withdrawals from Roth IRAs).
• Are Roth IRAs and Roth individual 401(k)s the same thing?
  No, Roth IRAs and Roth individual 401(k)s are not the same thing, although they share some similarities.A Roth IRA is an Individual Retirement Account you open outside of your employment relationship, and you make contributions with after-tax income.A Roth individual 401(k) is a type of account offered by some employers that allow employees to contribute a portion of their income on an after-tax basis, similar to a Roth IRA. The contributions and earnings in a Roth individual 401(k) grow tax-free, and qualified withdrawals in retirement are also tax-free.
• What are mutual funds?
  Mutual funds are investment vehicles that pool money from multiple investors to invest in a diversified portfolio of securities, such as stocks, bonds, or other assets. Many mutual funds and ETFs offer built-in diversification by investing in a wide range of securities.You can hold mutual funds in most if not all, brokerage accounts.
• What are Required Minimum Distributions?
  Required Minimum Distributions (RMDs) are the minimum amounts that individuals with certain retirement accounts, such as pre-tax traditional IRAs and 401(k)s, must withdraw from their accounts each year once they reach a specific age (73, as of May 2023).RMDs are mandated by the Internal Revenue Service (IRS) to ensure that individuals begin withdrawing and paying taxes on their retirement savings.Roth IRAs do not mandate distributions during the account owner’s lifetime.
• If I am self-employed, what kind of retirement plans are available?
  If you are self-employed or run a small business, there are several retirement plan options:Simplified Employee Pension (SEP)-IRA: A SEP-IRA allows you to make contributions as both the employer and the employee. Contributions are tax-deductible, and the account grows tax-deferred. SEP-IRAs are easy to set up and have higher contribution limits compared to traditional IRAs.Solo 401(k) or Individual 401(k): This plan is designed for self-employed individuals or business owners with no employees (except for a spouse). Solo 401(k)s allow for generous contribution limits and offer both pre-tax and Roth contributions. They also allow for loans and offer more investment options.SIMPLE IRA: The Savings Incentive Match Plan for Employees (SIMPLE) IRA is suitable for small businesses with fewer than 100 employees. It allows both employer and employee contributions, and contributions are tax-deductible. However, the contribution limits are lower than those of a Solo 401(k).
• What are contribution limits?
  Contribution limits (annual contribution limits) refer to the maximum amount of money that an individual can contribute to certain types of retirement plans within a given tax year. These limits are set by the Internal Revenue Service (IRS) and are subject to change annually.Note that rollovers do not count against your annual IRA contribution limit.
• What are profit-sharing plans?
  Profit-sharing plans are retirement plans that allow employers to share a portion of their company’s profits with employees. These plans are designed to incentivize and reward employees based on the company’s financial performance.
• What is a Self-Directed IRA?
  A self-directed IRA (sometimes called an SDIRA) is a type of IRA that allows investors to have more control over their retirement funds and investment choices. With a self-directed IRA, the account holder has the flexibility to invest in a broader range of assets beyond traditional stocks, fixed income, mutual funds, and/or options trading.