Rolling over an Alight 401(k): Step-by-step guide

Rolling over your retirement savings from one employer-sponsored plan to a new employer’s investment plan allows you to continue to plan for your future and manage your personal finances with greater ease.

Here, we’ll be learning more about Alight Solutions as an investment partner, as well as how you can roll over your Alight retirement assets to an IRA of your choice.

If you have a 401(k) at Alight from a previous job, there are a few options for you to consider when doing a rollover.

The process for Alight can be done either online or by phone and a check will be mailed for you to deposit into the new account.

We’ve laid out a step-by-step guide to help you roll over your old Alight 401(k) in five key steps:

1. 1. Confirm a few key details about your 401(k) plan
   2. Decide where to move your money
   3. Initiate your rollover with Alight
   4. Get a check in the mail and deposit it into the new account
   5. Make sure your funds are being invested properly

STEP 1

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

First, get together any information you have on your Alight 401(k). It’s okay if you don’t have a ton, but any details like an old account statement or an off-boarding e-mail from your former HR team can help. 401(k) paperwork can be confusing, so just focus on identifying the following items:

1. Is your account eligible for a rollover? In most cases, it takes about 2 weeks from the time you leave a company for your 401(k) to be eligible for a distribution or rollover. You can confirm that your plan is able to be transferred by contacting Alight or your previous employer’s HR department.
2. Do you have a traditional or Roth 401(k)? This will determine which type of IRA you’ll need to open (more on this in step 2). The vast majority of people have a traditional 401(k), and this is almost always the default option in a 401(k) plan you’d have access to at work. Only 12% of 401(k) plans even offer a Roth 401(k), but it’s worth checking. What’s the difference between the two? Just the way your contributions were taxed. With a traditional 401(k), your contributions came out of your paycheck on a pre-tax basis, but with a Roth 401(k), your contributions came out on an after-tax basis.
3. Is your mailing address up to date? Make sure your mailing address is updated on your Alight 401(k) account. They’ll use this address to send you a paper check as part of the 401(k) rollover process. If you need to update your address, make sure to do so during your phone call authorization (more in step 4).

STEP 2

Decide where to move your money

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:

1. An IRA — an IRA is an “Individual Retirement Account”. As the name suggests, it’s an account you open up on your own and it isn’t connected to an employer.
2. 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:

• IRAs aren’t tied to an employer — IRAs are generally easier to keep track of since they’re opened by you at an institution of your choice like Fidelity, Vanguard, or Betterment.
• Wider range of investment options — your 401(k) account generally has a limited set of investment options. With an IRA, you can invest your money in a wide range of stocks, ETFs and 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.

Think of your IRA as helping you do two key tasks:

1. Receive the money you’ve saved in your 401(k) at previous jobs so you can consolidate your savings and keep track of them.
2. 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.

STEP 3

Initiate your rollover with Alight

You’re making great progress. You’ve confirmed key details about your 401(k) plan and you have an IRA to transfer your money into. The next step is to initiate your rollover with Alight. Alight, like many plan sponsors, has two methods for requesting a rollover to another institution:

1. online through your Alight account
2. by calling Alight

Authorize via online process

Your plan may allow you to complete the rollover initiation process online. This can be a fast and convenient way to get your rollover started without having to mail any paperwork or making phone calls. You’ll want to confirm that your mailing and contact information on your account is correct so that your online submission is accurate. If you aren’t sure, you always have the option of initiating over the phone.

To start the online rollover initiation process, you’ll need to login to your Alight online account. Look for an option like “move assets”, “roll over 401(k) 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:

1. Opt for a direct rollover into an IRA at another institution — this is easier than an indirect rollover.
2. You may be asked how much of your balance you want to roll over. It’s easier to do a full rollover so you don’t leave any money behind.

Authorize via Phone

If you prefer to speak to an Alight representative to make sure everything is good to go, you can also initiate your 401(k) rollover over the phone. Contacting Alight 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. Alight’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:

1. 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.
2. 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.
3. 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. Be prepared for a little hold time but in our experience, the entire call should take no longer than 30 minutes.

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

STEP 4

Look out for your check in the mail and deposit into your new account

Alight will most likely distribute your 401(k) funds directly to you by paper check, using the mailing address they have on file for your account. Once you get the check, it’s then up to you to deposit that check with your new IRA 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.

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, and the second is to grow those assets by allocating them into investments that will increase in value over time.

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 a portfolio that was created for you 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. 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 generate higher returns but are more volatile we should own more of them early on when we can withstand their fluctuations in order to achieve their higher long-term returns.

Otherwise, you can assemble a portfolio on your own by making trades.

What other investment options do you have?

In addition to rolling over to an IRA, there are other options available for your 401(k) retirement savings. Here are a few popular options:

1. Cash out: Depending on their circumstances, some people may decide to withdraw or cash out their 401(k). It is important to know that cashing out your investment will be subject to both state taxes and federal taxes. Furthermore, if the withdrawal is done for the age of 59 1/2, there may be a withdrawal penalty. Your money will also lose the opportunity to grow tax-deferred.When plan participants cash out their 401(k)s prior to the normal retirement age, it causes what is known as ‘leakage’ which may further deprive employees of a comfortable retirement.
2. Enroll in a new workplace 401(k) plan: When changing jobs, it may be possible to enroll in a new workplace 401(k) plan and continue tax-deferred growth.
3. Keep your 401(k) in your former employer plan: Some individuals may opt to keep their 401(k) plan in their former employer plan and continue tax-deferred growth potential. However, you will not be able to continue contributions to the old 401(k) plan.

Conclusion

401(k) rollovers are 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 brokerage account, you may also be able to invest in a wider range of assets.

The process can seem a little daunting, but 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.

Extras

Roth conversions

For those who want extra credit: you may have heard of the term “Roth conversion”. That’s when somebody rolls over a traditional 401(k) into a Roth IRA. Why would somebody do this? It all comes down to taxes.

Recall that with a traditional 401(k) your contributions are made pre-tax. When you roll over a traditional 401(k) into a traditional IRA, your assets continue to grow with no taxes being paid — until you start withdrawing your money, usually at the time of retirement. At that point, you’ll pay income taxes at whatever your rate will be then.

If you believe your income tax at retirement will be greater than your income tax today, then it might make sense to consider a Roth conversion. This allows you to pay income taxes on your rollover amount today. Then, the money in your Roth IRA grows and can be withdrawn tax-free.