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

If you have a 401(k) at Empower Retirement from a previous job, there are a few options for you to consider when rolling over a 401(k). You can complete your Empower rollover either via the phone or by filling out a form. You’ll then receive a check in the mail which you can deposit into your new IRA or another retirement plan.

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

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

What is an Empower 401(k) rollover?

A 401(k) rollover is the transfer of retirement savings from an old employer-sponsored retirement plan—often a 401(k)—into a new individual retirement account (IRA) or 401(k). An Empower 401(k) rollover lets you move, or roll, your existing Empower retirement funds to a new retirement plan. Depending on your account type, you have a few different rollover options. You may end up rolling over a Roth 401(k) to a Roth IRA, or decide to convert your 401(k) to a Roth IRA if you so choose. (A Roth account allows you tax-free retirement income, so long as you follow the five-year rules.)

Rolling over your old retirement accounts into a single IRA allows you to keep better track of your retirement funds and better assess your retirement readiness. In other words, it’s a key step in smart retirement planning—so let’s take a closer look at how to do it.

STEP 1

Confirm key details about your Empower 401(k)

First step: Gather all the relevant information about your old Empower 401(k). The most important information to collect is your retirement account number, but collecting your old statements could be useful as well. Keep an eye out for the following:

1. Is your account eligible for a rollover yet? In most cases, it takes about two 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 retirement fund is able to be transferred by contacting the 401(k) plan administrator (in this case, Empower) 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). Most people have a traditional, pre-tax 401(k), which is usually the default option. 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 are taxed. With a Traditional 401(k), your contributions come out of your paycheck before taxes. With a Roth 401(k), your contributions come out after taxes were paid.
3. Is your mailing address up to date? Make sure your mailing address is updated on your Empower 401(k) account. They’ll use this address to send your retirement fund balance as 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

Pick a retirement account to roll your money into

In order to move a lump sum out of your qualified retirement plan, like a 401(k), you’ll first need to have an account opened for that money to move into.

You have two main rollover options:

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

Still have questions? We’ve written a full guide on the five key differences between 401(k)s and IRAs. 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 — An IRA is generally easier to keep track of since you open it yourself at an 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, which may include mutual funds or company stock. With an IRA, you can invest your money in a wide range of stocks, ETFs, and sometimes even private assets and alternative investment options 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. What’s more, as long as the money is in your IRA, you won’t have to worry about the IRS taxing it.

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.

Can I open an Empower IRA?

If you want to reap the benefits of an IRA but enjoy Empower’s services, then you can always roll your 401(k) into an Empower IRA. However, there are many options beyond an Empower IRA that you should consider.

Each IRA provider might offer different services for their IRAs. Make sure to compare your IRA options before you being your 401(k) rollover.

What type of IRA should I open?

When you decide to open a new IRA account, you might get to pick between a Rollover IRA, Traditional IRA, or Roth IRA. Each option comes with its own set of benefits:

• If you had a tax-deferred, Traditional 401(k) — pick a “Rollover IRA” or, if that’s not available, “Traditional IRA” or, if that’s not available, just “IRA”.
  • 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. If you inadvertently convert a pre-tax 401(k) to a Roth IRA, you’ll be liable for ordinary income tax on the entire balance. Consult a tax advisor for additional guidance.
• 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. Here, you’re working with accounts that have different tax treatments, so the assets should remain separate.

STEP 3

Initiate your rollover with Empower

In most cases, the easiest way to initiate a rollover for your Empower 401(k) is by calling and speaking with an Empower representative. Requesting a rollover of your employer’s plan account over the phone allows you to confirm your information, correct any errors, update your mailing address if needed, and initiate the rollover all in one go. Empower‘s phone number should be visible on an old account statement, website, or on the distribution form.

To prepare for your call, gather an old 401(k) statement and your Empower IRA account number.

Don’t forget to confirm your mailing address during the call. Empower 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 rep know during the call and provide your current address.

After your identity is verified, you’ll be able to tell the customer service representative that you want to do a direct rollover. A direct rollover is where your funds are directly transferred to your new IRA provider. It often means the check is made out in the name of that IRA provider but “for the benefit of ” (FBO) you. An indirect rollover is where funds are first transferred to you, or a check is made out in your name. You deposit the funds in one of your own accounts, but then you have 60 days to send that money on to your IRA account if you want the rollover to be tax-free. This can create a little extra work for you which is why most people opt for a direct rollover.

STEP 4

Get your Empower 401(k) retirement withdrawal and deposit it into your new IRA or 401(k) account

In many cases, Empower will only distribute your 401(k) funds directly to you, 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.

How to deposit your Empower 401(k) check

Mobile deposit

Mobile deposit is usually the quickest and easiest option for moving funds. This process usually takes 3-5 business days.

Deposit in person at a local branch

Another quick way to deposit funds into your new account is in person at a local branch. As with mobile deposits, this process usually takes 3-5 business days.

Send the check by mail

The final way to deposit your check is through the mail. This process is slower and can take several weeks for the funds to get deposited.

You should deposit the check you get right away. Even if the check is made out to your IRA provider (and thus a direct, rather than indirect rollover), it needs to be deposited within 60 days of receipt. This is key if you want to avoid unnecessary income tax as well as pesky early-withdrawal penalties that you’ll face when cashing out a 401(k) from an old job early. If your old account has a significant balance, those expenses can really add up.

STEP 5

Make sure your new IRA or 401(k) 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. This process is otherwise known as asset allocation. If you chose an automated IRA, this step will happen automatically. That’s because as soon as your funds arrive they’ll be allocated into a portfolio with built-in diversification 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, 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, and the key is getting your asset allocation right. 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. In all cases, diversification is key. Just as you don’t want to carry all your eggs in one basket, you don’t want to invest all your retirement money into one asset—or even one asset class or industry. Spreading the wealth helps guard your portfolio against market fluctuations, increases your retirement readiness, and makes your retirement goals more achievable.

If you feel like you need additional help, consider consulting with a qualified fiduciary financial advisor. Be sure to work with someone who is adequately credentialed to dispense investment advice.

Final thoughts: Rolling over your Empower 401(k) to an IRA

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, 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.