How to Roll Over Your 401(k) to TD Ameritrade

If you’ve recently left a job or are looking to consolidate your retirement accounts, a 401(k) rollover can be an essential step in managing your financial future.

In this post, we’ll discuss how to perform a direct rollover from your old 401(k) plan to a rollover IRA or other IRA types, such as a traditional IRA or Roth 401(k), at TD Ameritrade.

Whether you’re transitioning from an employer-sponsored retirement plan or simply seeking a more flexible investment platform, a rollover IRA can offer greater control and options for your retirement savings.

By following our step-by-step mobile deposit instructions, you can seamlessly transfer funds and continue building a strong financial foundation for your golden years.

How Do I Open a TD Ameritrade IRA?

Don’t have a TD Ameritrade IRA? You can open an account…

It will take you about 15 minutes to open your IRA online.

Be sure to select “IRA Rollover”, fill in your contact information, and designate a beneficiary.

If you have questions about your 401(k) rollover, you can call 800-454-9272 to speak with a TD Ameritrade knowledgeable New Account Representative.

5 Steps to Roll Over Your 401(k) to TD Ameritrade

Here are the five simple steps to completing your 401(k) into a TD Ameritrade 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 TD Ameritrade, 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 by following the instructions above

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 rollover 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 TD Ameritrade 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.

The Pros and Cons of Rolling Over Your Old 401(k) into a TD Ameritrade IRA

When it comes to retirement planning, one of the decisions you may face is what to do with your old 401(k).

Rolling over your old 401(k) into an Individual Retirement Account (IRA) is a crowd favorite. Let’s explore why, and also take a look at some potential drawbacks.

Advantages of Rolling Over Your Old 401(k) into a TD Ameritrade IRA

1. Tax-Deferred Growth: Your investments will continue to grow tax-deferred until you withdraw them, similar to your 401(k).
2. Investment Options: At TD Ameritrade, you’ll have access to a wide range of investment products, including mutual funds, ETFs, stocks, bonds, options trading, and more.
3. Resources and Tools: TD Ameritrade offers a wealth of resources and tools to help you manage your IRA effectively.
4. Flexibility: You may have the flexibility to convert to a Roth IRA, providing further tax advantages. (IRA contributions must be in accordance with IRS rules and contribution limitations)
5. Future Movement: You retain the option to move assets to a future employer’s plan later if desired.
6. Special Withdrawals: Under special circumstances, you may be able to take penalty-free withdrawals prior to age 59½. Note that these withdrawals only happen in exceptional circumstances.
7. No Annual Maintenance Fee: Your TD Ameritrade IRA will not incur an annual account maintenance fee.

Before making a decision, weigh these pros and cons, consider your financial situation, and think about your retirement goals. A consultation with a financial advisor can provide personalized investment advice, so consider having a conversation if you deem it necessary.

Disadvantages of Rolling Over Your Old 401(k) into a TD Ameritrade IRA

1. Loan Restrictions: Unlike some 401(k) plans, you cannot take out a loan against your IRA.
2. Loan Repayment: Any outstanding plan loan balances need to be repaid prior to rolling over, or you may incur income taxes and potentially a 10% tax penalty.
3. Trading-Related Expenses: Your investment activity may incur trading-related expenses, including commissions.
4. Limited Investment Access: You may not have access to the exact same investments in an IRA brokerage account that you had in your previous employer-sponsored plan.
5. Creditor Protection: The level of protection from creditors for assets in an IRA is lower than in a 401(k) plan.
6. Tax Implications for Employer Stock: If you hold appreciated employer stock in your former employer’s plan account, and you transfer it to an IRA, there may be tax consequences upon selling it. It’s advisable to consult with a tax advisor for this matter.

It’s important to weigh these pros and cons and consider your own financial situation and retirement goals before making a decision.

Consulting with a financial advisor can provide personalized investment advice tailored to your circumstances.

The Pros and Cons of Leaving Your Assets in Your Former Employer’s 401(k) Plan

Let’s also consider the advantages and disadvantages of leaving your assets in your former employer’s plan.

Advantages

1. Investment Plan Choices: Your investment plan may include low-cost, institutional-class products, potentially reducing the costs of your investments.
2. Potentially Lower Costs: The total costs may be lower than other alternatives, such as rolling the funds into an IRA.
3. Tax-Deferred Investments: Your investments will remain tax-deferred until you withdraw them.
4. Loans: You may be able to take loans against your account, a feature not typically available with IRAs.
5. Ease of Maintenance: You may not have to take any action or complete additional paperwork.
6. Penalty-Free Withdrawals: If you left your old employer between age 55 and 59, you may be able to take penalty-free withdrawals under the Rule of 55.
7. Creditor Protection: Your retirement plan balances may be protected from creditors and legal judgements under federal law, which can offer a higher level of protection than an IRA.
8. Future Rollovers: You may still be able to roll over to a future employer’s plan later.
9. Investor Education: You would still have access to investor education, guidance, and planning provided to plan participants.
10. Fiduciary Selection: The investment choices on your plan menu were selected by a plan fiduciary, which could provide a higher level of oversight and expertise.

Disadvantages

1. Limited Investment Choices: Your investment choices are generally limited to those in the plan, potentially reducing your ability to diversify or select specific investments.
2. Potential Fees: Your former employer may pass certain plan administration or recordkeeping fees through to you, potentially increasing your costs.
3. No New Contributions: If you leave your employer, even though you would still own your entire vested balance, you would not be able to contribute any new funds.
4. Management Challenges: Managing your investments among multiple accounts can be a lot of work, especially as you accumulate more accounts over your career.

The Pros and Cons of Rolling Over Your Assets into a New Employer’s Retirement Plan

Lastly, let’s go over the pros and cons of rolling over your assets into a new employer’s retirement plan.

Advantages

1. Lower Costs: The total costs might be less than other alternatives, such as rolling over into an IRA account.
2. Tax-Deferred Investments: Your investments will continue to grow tax-deferred until you make withdrawals.
3. Loans: You may have the option to take loans against your account, a feature not typically available with IRAs.
4. Penalty-Free Withdrawals: If you leave your new employer between ages 55 and 59, you may be able to make penalty-free withdrawals.
5. Creditor Protection: Your retirement plan balances may be protected from creditors and legal judgements under federal law.
6. Investment Options: Your plan investment choices may include low-cost, institutional-class products.
7. Investor Education: You may have access to investor education, guidance, and planning provided by your new employer to plan participants.
8. Fiduciary Selection: The investment choices in your plan menu are selected by a plan fiduciary.
9. Possibly No Required Minimum Distributions (RMDs): If you roll over to a new employer’s plan, you may not have to take required minimum distributions (RMDs) if you decide to continue working.

Disadvantages

1. Limited Investment Choices: Your investment choices would be limited to those offered in the new plan.
2. Potential Fees: Your new employer may pass certain plan administration or record-keeping fees on to you.
3. Paperwork: You may be required to complete paperwork to move your assets over.
4. Tax Consequences for Employer Stock: If you hold appreciated employer stock in your former employer’s plan account, there may be tax consequences if you transfer your plan assets to another account. It is recommended to consult with a tax advisor in this situation.

As you can see, each option has its own set of advantages and disadvantages. It’s essential to consider your own financial circumstances, retirement goals, and risk tolerance before making a decision.

We highly recommend consulting with a financial advisor or tax professional before deciding the best path for your retirement planning journey.

Why it Makes Sense to Transfer your Old 401(k) Plan to a Self-Directed IRA

When it comes to managing your retirement savings, having control and flexibility over your investments can play a crucial role in achieving your financial goals.

Transferring your old 401(k) plan from a to a self-directed Individual Retirement Account (IRA) is a smart move that offers numerous advantages.

1. Greater Investment Freedom: Unlike traditional 401(k) plans, which often limit your investment choices to a predefined selection of funds, a self-directed IRA allows you to invest in a broader range of assets.
2. Enhanced Control and Decision-Making: Rather than relying solely on the investment options provided by your former employer’s plan, a self-directed IRA allows you to make investment decisions based on your own research, expertise, and risk tolerance.
3. Potential for Higher Returns: By diversifying your portfolio across different asset classes and seizing investment opportunities that align with your research and expertise, you can optimize your investment strategy.
4. Tax Advantages and Estate Planning Benefits: Contributions to a self-directed IRA may be tax-deductible, allowing you to reduce your current taxable income.
5. Consolidation and Simplification: Instead of managing multiple retirement accounts, consolidating your funds into a single self-directed IRA streamlines your portfolio and makes it easier to track your investments and monitor their performance.

TD Ameritrade, Inc., member FINRA/SIPC, a subsidiary of The Charles Schwab Corporation.

TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank.