Principal 401(k) Rollovers: Step-by-step Guide

Rolling over a Principal 401(k): Step-by-step guide

If you have a Principal 401(k) from a previous job, there are a few options for you to consider when rolling over your retirement funds. The process for a Principal rollover can be done either online, by phone, or by mailing or faxing their rollover request form.

Once the Principal rollover is initiated, Principal Bank will usually send a check directly to your new account provider. You should see your retirement funds deposited in 10-15 business days after you’ve submitted the request.

Here, we’ll be exploring your options, learning about various investment products, and reviewing how to roll over your 401(k) plan with Principal Financial Group.

We’ve laid out a five-step guide to help you roll over your old Principal 401(k):

What is a 401(k) rollover?

A 401(k) rollover is the process of transferring retirement funds from an old employer-sponsored retirement plan to a new retirement savings account. For many, it’s a critical step in retirement planning.

Most people who roll over end up transferring their retirement funds into a new or existing IRA (Individual Retirement Account), but it’s also possible to transfer the funds to a new employer-sponsored retirement plan.

What Are Required Minimum Distributions?

Required Minimum Distributions (RMDs) refer to the annual amounts of your retirement savings that must be withdrawn from an employer-sponsored plan, simple IRA, traditional IRA, or SEP-IRA once you reach retirement age.

As of 2024, the age at which RMDs need to be taken is 73 years. The account owner needs to withdraw at least the amount of their RMD every subsequent year based on the IRS life expectancy tables. Keep in mind that retirement savings in a Roth IRA are not subject to RMDs during the original accountholder’s lifetime. If you have further questions, a financial advisor can help.

STEP 1

Gather your Principal 401(k) details

To start the Principal rollover process, first gather any information you have on your Principal retirement plan. It’s okay if you don’t have a ton; even an old account statement or an off-boarding e-mail from your former HR team or plan administrator can help. 401(k) paperwork can be confusing, so just focus on identifying the following items:

Check your account for rollover eligibility. You typically have to wait about two weeks after leaving your job before starting a Principal rollover. Check with your old HR department to verify whether your retirement savings accout is eligible yet.
See what type of 401(k) you have. The type of 401(k) you have determines what type of IRA you can open (more on this in step 2). Most 401(k)s are traditional, meaning contributions are tax deductible in the year they’re made (and taxable when withdrawn during retirement). However, some businesses offer Roth 401(k)s, which can be rolled into Roth IRAs. This allows you to make contributions post-tax and lets your account grow income tax-free, so long as you follow the Roth IRA rules.
Double-check your mailing address. Make sure your mailing address is correct on your Principal 401(k) online account in case they choose to send a paper check through the mail.

STEP 2

Choose a new account

In order to move the money out of your 401(k) account, you’ll first need to have an account opened for that money to move into.

You have two main options:

An IRA — an IRA is an individual retirement account. As the name suggests, it’s a retirement savings account you open up on your own, and it isn’t connected to an employer.
A new 401(k) — you might have an active 401(k) account with a current employer. If so, you may be able to transfer your old 401(k) savings into that current account. This isn’t always possible though, and you’ll need to check with your current 401(k) provider and HR person.

We’ve written a full guide on the five key differences between 401(k)s and IRAs if you’re trying to understand all of the differences.

Ultimately, most people who roll over an old 401(k) do so into an IRA for a few key reasons:

Not tied to an employer — IRAs are generally easier to keep track of since you open one yourself at a financial institution of your choice, like Fidelity, Vanguard, or Betterment.
A wider range of investment options — your 401(k) account generally has a limited set of investment options. (In fact, most 401(k)s only allow accountholders to choose from a variety of mutual funds.) With an IRA, you can invest your money in a wide range of stocks, ETFs, mutual funds, and sometimes even private assets like angel investments and cryptocurrency.
Quicker process — according to the GAO, rollovers into 401(k)s tend to be more time-consuming and administratively challenging than rollovers into IRAs.

Your IRA can help you do two key tasks:

Receive the retirement funds you’ve saved in your 401(k) at previous jobs so you can consolidate your savings and keep track of them.
Grow that money by allocating it to investments that will increase over time.

The good news? Opening an IRA can almost always be done online and should take you less than 10 minutes if you don’t already have one.

Allocating your IRA savings to investments will help it grow over time.

Woman calculating her IRA investment returns — Allocating your IRA savings to investments will help it grow over time.

How do I choose an IRA provider?

Many financial service institutions offer IRAs, including firms offering brokerage accounts, banks, and newer fintech companies. In order to pick the best account for you, there’s one up-front question to answer:

Do you want to make your own investment decisions, or would you rather have the investing decisions made for you so you can just set-it-and-forget-it?

If you want to make your own decisions, then what you’ll want is a self-directed IRA. That allows you to make your own trading decisions and invest in whichever financial securities you’d like.

The key features to compare when choosing among self-directed IRAs include:

What do you want to invest in? The exact investment options among IRA providers varies. Most of them allow you to invest in stocks, ETFs (Exchange-Traded Funds) and options. Other specialized IRA providers will let you invest in private assets, real estate, and cryptocurrency.
Access to research and data. Some brokers provide access to premium research and data. If you’re a more hands-on investor, this might be important to you.
Ease of use — while user interfaces are getting better across the board, newer fintech providers tend to be more popular with those who really value an intuitive app experience.

If you want the investing decisions made for you then you’ll be best served by an automated IRA, also known as a robo-advisor account. With an automatic rollover IRA, you’ll answer a series of questions (known as a risk-tolerance questionnaire), and your answers will be used to create a diversified portfolio of investment options that suits your personal and financial situation.

That portfolio is then rebalanced automatically over time without you having to do any work. It’s a great tool for those who don’t want to spend much time managing their investments.

The key features to compare when choosing an automated account include:

Annual fee — most automated accounts charge an annual fee that’s expressed in percentage terms — e.g. 0.25%. This is the percentage of your assets that they’ll take annually for managing a portfolio for you. For example, if your automated IRA charges a 0.25% annual fee and you have a $10,000 account you’ll pay $25 per year to the IRA provider. This fee is often referred to as an advisory fee or management fee. Most fees for an automatic rollover IRA range from 0.25% – 0.50% so be wary of paying more than that. Some providers now even offer zero-fee accounts. Nothing is truly free though, since these IRAs will often fill your portfolio with their own proprietary exchange-traded funds (ETFs) which have their own fees.
Ease of use — the original providers of automated accounts were tech-first companies like Betterment and Wealthfront who sought to provide a simpler, more intuitive user experience. While more established companies now offer automated accounts of their own, the newer upstarts maintain a usability advantage.
Level of customer support — on the other hand, the longer-standing, bigger companies have more robust customer support systems built over many years, including well-staffed call centers and often even branch networks. If that’s important to you, then a larger institution might be your bet.

What type of IRA should I open?

During the process of opening your new account, you may get asked which type of IRA you’d like to open. You might see the following options: rollover IRA, traditional IRA, or Roth IRA. Here’s how to pick the right one:

If you had a traditional 401(k) — pick a rollover IRA or, if that’s not available, traditional IRA. If that’s not available either, try looking for IRA, plain and simple. The only exception would be if you’re considering a Roth conversion, but this is an advanced tax planning strategy that most people don’t need to worry about (and those who do would be well served by hiring a tax advisor to see them through the process).
If you had a Roth 401(k) — pick a Roth IRA. You’ll need to match the Roth 401(k) to a Roth IRA for tax reasons.
If your 401(k) has mixed assets — you’ll need to open two IRAs, one Roth and one Traditional for their respective assets.

STEP 3

Initiate your 401(k) rollover with Principal

You’re making great progress. You’ve confirmed key details about your 401(k) plan and you have an IRA to transfer your account balances into. The next step is to initiate your Principal rollover. Principal Bank has a few methods for requesting a direct rollover to another institution:

online through your Principal Financial account
by filling out Principal’s rollover authorization form
by calling Principal

Authorize online

The simplest way to submit a rollover request with Principal is by logging in to your online Principal account.

One you’re logged in, look for an option like “move account balances”, “roll over money”, or “start a distribution.” These options can sometimes be hidden under an “actions” or “withdrawal” menu.

Ultimately, the option you want to select should explicitly say “rollover” and you’ll often need to specify that you want to move your funds “out of the plan” or “to another institution.”

Two other important tips to keep in mind while going through the online process:

Opt for a direct rollover into an IRA at another institution — this is easier than an indirect rollover.
You may be asked how much of your account balances you want to roll over. It’s easier to do a full rollover so you don’t leave any money behind. (Keep in mind that rollovers don’t count toward the annual contribution maximum IRA rules, so you don’t have to worry about penalties for rolling over a large account balance.)

Authorize via Form

Rolling over via form allows you to avoid a phone call, but can sometimes get rejected which will prolong the process. If you’ve confirmed that your mailing address and contact information on your account is correct and that your account balances are eligible for a rollover, initiating your rollover via form is worth considering. If you aren’t sure, you may want to initiate your rollover over the phone or online to avoid any issues during processing.

You can download the Principal direct rollover form by logging into your online account. Once you’re logged in, follow these steps:

Go to the “Rollovers” menu, and choose “Rollover IRA”
Choose “Roll money outside Principal”
Hit the “Request rollover” button, which should download a PDF

Once you have the form, you’ll need to fill out, sign, and send it back to Principal Bank by mail or fax. The mailing address and fax number can be found on the rollover form.

Authorize via Phone

If you prefer to speak to a Principal Bank representative to make sure everything is good to go, you can also initiate your rollover over the phone. Contacting Principal Bank directly over the phone allows you to correct any issues on your account, update your mailing address, and initiate the rollover all in one go. Principal‘s phone number should be visible on an old account statement, website, or on the distribution form.

In order for your call to go smoothly, follow these tips:

Set aside 30 minutes and a quiet space in which to make the call. Most of the time the call itself will take around 10 minutes, but there can often be a waiting time before you’re connected to an operator.
If you have an old 401(k) statement, keep it handy. No worries if not — you’ll be asked for your social security number and some other personal details to verify your identity.
Before you do the call, log into your new IRA account. Note down the following information:
- Your IRA account number
- Any other check-related instructions. These details are usually found on the IRA provider’s website in a “Funding” or “Rollover instructions” section and include things like the name of the institution to whom the check is made out (usually the full legal name of the IRA provider you’ve chosen).

Then place the call. Don’t forget to confirm your mailing address during the call. Principal will mail your rollover check to the address they have on file. If you need to update your address with them, just let the Principal rep know during the call and provide your current address.

STEP 4

Confirm that the Principal 401(k) funds are deposited to your new account

Principal will typically send your 401(k) funds directly to your IRA or new 401(k). If that’s the case, simply keep an eye out for your rollover funds to hit your new account in 10-15 business days.

In some cases, they may send the check to you to deposit or forward to your new provider. There are a few ways you can deposit your check depending on the provider:

Mobile deposit — the easiest option is to check your provider’s mobile app to see if they have a mobile deposit option. Not all providers provide this option but it’s worth checking. Mobile deposits are the quickest option and typically take 3-5 business days to show up in your account.
Deposit in person at a local branch — if your provider has a physical branch nearby, you can also deposit the check in person. Checks deposited in person typically take 3-5 business days to show up in your account.
Send the check by mail — you can also send the check by mail to the provider using the address you previously looked up. Funds that are mailed can take up to 15 business days to show up in your account.

What if my check gets misplaced or lost in the mail?

This unfortunately does happen every once in a while, but don’t worry — your money hasn’t disappeared. If your check doesn’t arrive then you’ll have to call your 401(k) provider (Principal Bank) again and ask them to issue a new one.

They’ll place a stop on the first one, and nobody will be able to cash the first (lost) check since it’s generally made out to you or your IRA provider and will always stipulate that it’s “for the benefit of” or FBO, your name.

STEP 5

Make sure your IRA is being invested appropriately

Remember there are two goals of rolling over an old 401(k) into an IRA — the first is to consolidate your 401(k) assets from your previous employer, and the second is to grow those assets by allocating them into investments that will increase in value over time. Growth is the main point of retirement planning, so don’t forget about it!

Your very last step in executing a rollover is to make sure that the second goal is being met and that the funds in your IRA are being appropriately invested. If you chose an automated IRA then this should happen automatically. That’s because as soon as your funds arrive they’ll be allocated into investment choices for you based on the questionnaire you filled out during the sign-up process for your new IRA account. You should still log in and check to make sure that’s the case, but usually, there’s nothing more for you to do.

If you choose a self-directed account, then you’ll have to invest the money yourself (or with the help of a financial advisor skilled at retirement planning). Often the simplest option is to purchase a target-date retirement fund — this is an investment vehicle that puts your money into a combination of higher-risk, higher-return stocks and lower-risk, lower-return bonds. The exact mix changes as you age so that you have more stocks when you’re younger and less as you get older.

Because stocks can generate higher long-run returns but are also more volatile, you might consider owning a higher percentage in stocks in your early working career and gradually shift away from stocks as you near retirement.

Otherwise, you can assemble a portfolio on your own by making individual security trades and investment choices. To get the full picture of your finances, investments, and tax, speak to a financial advisor for guidance.

Get started on your Principal 401(k) rollover

401(k) rollovers are a key part of retirement planning, and a great way for you to tax-efficiently transfer the savings in old 401(k) accounts you have. If you roll over into an IRA, you may also be able to invest in a wider range of assets.

The process can seem a little daunting, but as we’ve seen, there are just five key steps to follow. Most people who complete a rollover are glad they did. The assets in accounts like your IRA will probably end up being your biggest source of financial support when you retire. Investing a little time to get those assets set up and working for you in the right way can really pay off.

Start your Principal 401(k) rollover with Capitalize

At Capitalize, we’ve made it our mission to make the retirement planning process easier for everyone. If you choose to do a 401(k)-to-IRA rollover, we can handle the entire process for you. Most of the process can be done online and our rollover experts will guide you through any of the manual parts.

Step 1: Gather your Principal 401(k) details

Step 2: Choose a new account

Step 3: Initiate your rollover

Step 4: Deposit rollover check

Step 5: Invest your funds

Get Started