How to Roll Over a Merrill Lynch 401(k)

Having to do a 401(k) rollover probably means that you’re starting a new job or in the process of transitioning between jobs. Not only can changing jobs be stressful but there is also an important decision to make about rolling over your 401(k) plan account or going a different direction.

Failure to roll over your 401(k) could make things less than optimal down the line.

Luckily, rolling your 401(k) over to Merrill Lynch is a straightforward process. Below, we’ll discuss what you need to know if you decide to perform a 401(k) rollover to Merrill Lynch.

5 Steps For a Merrill Lynch 401(k) Rollover

Here are the five simple steps to completing a Merrill Lynch 401(k) into an 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, 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.

Contact your 401(k) provider to authorize the transfer

You’ll need to reach out to Merrill Lynch 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 new 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.

What Is Merrill Lynch?

Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as “MLPF&S” or “Merrill”) are subsidiaries of Bank of America Corporation (BofA corp).

Now simply referred to as “Merrill”, they’re a wealth management and financial services company offering a broad range of investment products, brokerage account services, and financial planning tools.

In addition to offering a dedicated relationship with a wealth management advisor, Merrill is able to design a personalized financial strategy for you and one that can make the best use of your retirement assets.

Another point to keep in mind is that you are able to open a rollover IRA through Merrill, and the Merrill Edge rollover IRA account offering comes with specialists available by phone 24/7.

What Is a 401(k) Rollover?

A 401(k) rollover happens when you move assets from your former employer’s plan to your new employer’s plan. By rolling them over, you ensure that your retirement strategy (and related tax advantages) remain in place without unnecessary charges like early withdrawal penalties.

There are two specific types of rollovers: direct rollovers and indirect rollovers. With a direct rollover, funds from a qualified retirement plan (such as a 401(k)) are transferred directly into another savings account (such as an Individual Retirement Account, or IRA).

Rollover Options for Your 401(k)

There are a few options to consider when rolling over your 401(k). But like any big financial decision, carefully weighing up your options or speaking with your plan administrator or a financial advisor is highly recommended.

We also suggest finding out more about all of the potential tax implications by speaking with a qualified tax advisor.

You have the option to transfer your retirement savings into a new IRA, but there are other choices you might find more appealing depending on your specific circumstances.

Here’s a summary of potential paths forward when considering rolling over your 401(k):

Roll Over Into a Traditional IRA

You can select to roll over your 401(k) into a traditional Individual Retirement Account (IRA) through a process known as a 401(k)-to-IRA rollover. If you choose to manage the account on your own, it’s also sometimes referred to as a self-directed IRA.

This is a popular option since it enables you to exercise greater control over your retirement savings account, and it allows you to preserve the tax advantages associated with your 401(k) plan. Most rollovers — when done correctly — shouldn’t involve any income tax or early withdrawal penalties.

In this process, your funds are deposited into an account opened at a provider of your choice, as opposed to kept in an account tied to your former employer.

Rolling over your 401(k) to an IRA grants you the freedom to select a provider that aligns with your preferred investment choices (like mutual funds and ETFs), fee structure, and your retirement goals.

Note that both 401(k)s and traditional IRAs will come with Required Minimum Distributions (RMDs) beginning at age 73. RMDs are fully taxable at ordinary income rates, and can have the effect of driving up your tax bill in retirement — especially if you’re already taking Social Security.

If you keep your money in your 401(k), however, you can delay taking RMDs until you actually retire. This only applies in the event that you’re still working beyond age 73.

Find out more about the process involved in rolling over an old 401(k) to a new IRA.

Roll Over Your Existing 401(k) to a new 401(k)

A 401(k)-to-401(k) rollover is a possibility if your new employer also offers a 401(k) plan and the new plan accepts roll-ins. This process can be slightly trickier than rolling over your 401(k) to an IRA.

This won’t be an option if your new employer doesn’t offer a 401(k) or a different type of employer-sponsored retirement plan that doesn’t accept 401(k) transfers in.

If your new company does allow a 401(k)-to-401(k) rollover, then rolling over to the new account might be a smart idea if you like the investment options in your new plan and you find the fees reasonable.

Cash Out Your 401(k) Savings

Another option is to withdraw or cash out your 401(k). However, be aware that this may lead to income taxes and penalties on the total amount withdrawn — especially if you’re under 59 1/2.

An early withdrawal penalty of 10% will usually apply if you make an early withdrawal under age 59.5 and you don’t qualify for an IRS-determined exception.

Keep in mind that if you do decide to cash out, you will lose the opportunity for your 401(k) savings to grow tax-free over time. This could be quite a steep price to pay, especially if you consider the compounded value of lost earnings over time.

Financial experts generally warn against early withdrawals unless you’re left with no other choice.

Convert Your 401(k) to a Roth IRA

Converting your 401(k) into a Roth IRA entails a similar procedure to transferring your 401(k funds to a traditional IRA. Instead of using a traditional IRA as the destination account, you simply designate a Roth IRA to receive your 401(k) funds.

If you opt for this route, you’ll have to pay federal income tax (and possibly state and/or local income tax) on the entire amount converted. Pre-tax 401(k)s and Roth IRAs have different tax rules, so a conversion between the two accounts can be quite costly — if you’re not especially careful.

Additional reading: How to roll over a Roth 401 to a Roth IRA

Get Help Managing Your Merrill Lynch 401(k) Rollover

Rollovers can be tricky and confusing. With Capitalize, you have a trusted partner who can manage the complexities of 401(k) rollovers completely for you. Check out how we can help you here.