How to Roll Over a 401(k) to an Ally Invest IRA 2024

If you change jobs and enroll in a new employer-sponsored retirement plan, it’s important to roll over your previous retirement plans so you don’t lose track of your investments. Doing this will allow you to develop a more comprehensive strategy that makes the most of your investments.

When you move your retirement accounts, you can complete an IRA transfer by rolling over your previous 401(k), for example, into an Individual Retirement Account (or IRA account). This process is straightforward, but in some cases, you may need to act quickly to meet all regulatory guidelines.

Here, we’ll review your rollover IRA options with Ally Financial Inc., an SIPC-member financial institution. Note that most comprehensive trading accounts at Ally fall under the “Ally Invest” brand, rather than the “Ally Bank” brand. Ally Bank IRAs only offer access to banking products, like CDs, while Ally Invest IRAs allow for access to stocks and other securities.

Here, we’ll cover everything you need to know about rollovers to an Ally Invest account, including why you might want to perform a rollover, your options, and how you can start the process.

Why Would You Need to Roll Over Your 401(k) to Ally Invest?

There are a few common situations when you might consider rolling over your retirement savings into an IRA account with Ally Invest:

• You’re changing jobs: Instead of having several retirement accounts from all your previous jobs, many account holders choose to roll over their previous 401(k) to an Ally Invest IRA to keep their retirement savings in one place.
• You’re adjusting your retirement savings strategy: If you have various types of retirement accounts and you need to adjust your strategy, you might consider rolling over your retirement savings to Ally’s Traditional IRA or Roth IRA.
• You’re looking to invest your IRA at a financial institution with lower fees: If you currently have your retirement savings with another broker, you may consider rolling the funds over to Ally since they offer lower annual fees for Traditional IRA accounts than many other brokerages.
  • Additionally, they offer robo portfolios (if you don’t want to invest the money yourself) as well as self-directed trading (if you want to take control of your own funds). Their cash-enhanced robo portfolios have a 0.0% annual fee, and their market-focused robo portfolios have a 0.30% annual advisory fee.

Your Retirement Plan Options

When you move jobs, you have a few different choices as it relates to your retirement savings.

Here are your four main options:

1. Leave your 401(k) where it is: You can always leave your 401(k) account where it is, especially if you are making a career change that won’t come with a new retirement plan. Funds in your 401(k) can continue to grow tax-deferred, even if you’ve separated from your employer. However, you’ll typically have better results if you move the funds to a different account with lower fees and more comprehensive investment options.
2. Roll it over to an IRA: By rolling over your 401(k) into an IRA, you can gain better control over your retirement funds, choose how they’re invested, and opt for accounts with lower annual fees. Although Traditional IRAs can be the most common choice for a direct rollover, there are many IRAs, such as a Roth IRA or SEP IRA, depending on your eligibility. You’ll then be able to make an additional IRA contribution for that tax year since the rollover won’t count towards your annual contribution limits.
   • Rollover to Ally Invest IRA: When you choose the rollover option, you can move your funds into an Ally Invest IRA account and benefit from low fees.
3. Move to your new job’s 401(k) plan: If your new job offers a 401(k) plan, you may be able to roll your previous 401(k) into your new account to maintain a single 401(k) under your new plan administrator.
4. Early withdrawal: While it’s not usually an advisable option, you can cash out your old 401(k) account and put the money elsewhere, like in a savings account. Remember that when you choose this method, you will be subject to early withdrawal penalties (if you’re under age 59.5) and other transfer fees, including income tax consequences.

Benefits of an Ally Invest IRA

Why do investors choose to invest their Individual Retirement Account with Ally? As a brokerage, they offer distinct benefits for their Traditional or Roth IRA account holders, including:

• Cost advantages: Ally offers no account minimum, low-cost trading, and over 17,000 mutual funds without transaction fees.
• Advanced trading features: Ally offers forex trading, options trading, automated portfolio management tools, and more, allowing it to compete with some of the largest online brokers.
• Portfolio management options: IRA investors can choose account types, whether they want to invest the funds themselves or work with Ally’s robo portfolios (where IRA assets are invested according to the company’s guidance.)

Ally IRAs (Individual Retirement Accounts) can make sense for active traders, options or Forex traders, or beginner investors opening their first IRA or rolling over their 401(k).

Rollover Types to Consider

When completing an IRA Rollover, you have options for how you choose to complete the transfer — each with different tax and fee implications. As always, if you want specific tax advice about your personal finances, speak to a tax professional. But here are the two types of rollovers:

Direct Rollover

With a direct rollover, your 401(k) account manager transfers your investment funds directly to your IRA custodian — the money never enters your hands. Or, the 401(k) manager may write a check to the IRA custodian, which you can deposit straight to your new IRA account. Once your new account has the funds in it, you can then reinvest the money into mutual funds, ETFs, or other investments of your choice. Direct rollovers are usually free from taxes and fees (if done correctly) and are the most popular and seamless option to move your 401(k) savings.

Indirect Rollover

With an indirect rollover, you withdraw the funds from the 401(k), receive them into your personal bank account, and take on the responsibility of re-depositing them to your IRA. In this case, if you’re working with a tax-deferred 401(k), your initial withdrawal is taxable, and your 401(k) manager must withhold 20% of the funds withdrawn.

When you roll over the funds to your IRA, you’ll be required to re-deposit the total amount, not only the 80% you received. Indirect rollovers are also subject to the 60-day rollover rule, which means the funds must be deposited back into a retirement account within 60 days of the initial withdrawal, or the IRS will consider it an early distribution.

Traditional IRA

Many IRA account types exist, like Roth IRAs, SEP IRAs, and Simple IRAs. With a Traditional IRA, you invest your funds pre-tax, like a 401(k). This means you don’t pay taxes on the investments or the gains until you withdraw the funds in retirement, at which point it’s considered income.

How to Roll Over Your 401(k) to an Ally Invest IRA

If you choose to roll over your qualified retirement plan (QRP) into an Ally Invest IRA plan, you can complete the conversion process online by following these simple steps.

Open an account

You must open an IRA account with Ally to roll over funds. If your 401(k) or 401(b) QRP is a Roth account, you’ll want a Roth IRA to receive your rollover. Otherwise, you will likely be directed to choose a Traditional IRA.

Request a rollover

As an IRA owner, you can now request a rollover, via indirect rollover or direct rollover, as we discussed earlier. You’ll need to provide your account numbers — of both your delivering and receiving accounts, as well as other details, to initiate the rollover request.

Start investing

After around two weeks, the funds will be available in your IRA account for you to begin investing.

You won’t be subject to Required Minimum Distributions until age 73 with a Traditional IRA, and you’ll never be subject to RMDs with a Roth IRA.

No matter the IRA you have, make sure your investments are in line with your overall asset allocation and don’t be afraid to seek the help of a qualified financial planner if you’re unsure as to how to proceed.

In Summary

Rolling over your retirement funds to an Ally Invest IRA can help you benefit from lower fees, exert greater control over your finances, and access various investment options.

If you’re changing jobs, looking to adjust your retirement strategy, or seeking a new custodian to manage your accounts, Ally Invest has a track record of helping its customers succeed.

As we discussed, a rollover can be done directly or indirectly. When managing your retirement savings, working with a trusted partner like Capitalize can help to bring you peace of mind. We can assist you with either rollover type and help you set up an IRA that suits your needs and goals.

Learn more about how Capitalize can help you save for retirement by doing the heavy lifting in your 401(k) rollover.