How to Roll Over a Retirement Account With Empower

A retirement account rollover involves moving funds from one retirement savings plan to another. Individuals often consider this process to consolidate multiple accounts, such as old 401(k)s from previous employers, into a single, more manageable account. This consolidation can offer a clearer view of one’s overall financial picture, potentially simplify investment management, and sometimes lead to reduced fees. The decision to roll over funds, particularly to or from an institution like Empower, is a common step for those seeking to streamline their retirement savings.

Understanding Rollover Types

When transferring retirement funds, there are two primary methods: a direct rollover and an indirect rollover. A direct rollover occurs when funds are transferred directly from one financial institution to another, without the money ever passing through the account holder’s hands. This method is generally preferred because it avoids potential tax implications and withholding requirements. For example, a trustee-to-trustee transfer is a form of direct rollover, where the funds are moved electronically or via a check made payable to the new financial institution.

Conversely, an indirect rollover involves the retirement plan administrator sending the funds directly to the account holder. Once the funds are received, the individual has a strict 60-day window to deposit the money into a new eligible retirement account to avoid taxes and penalties. If the funds are not redeposited within this timeframe, they can be treated as a taxable distribution. This method also often involves a mandatory 20% federal income tax withholding, which the individual must make up from other sources to fully roll over the original amount.

The direct rollover method simplifies the process by ensuring the funds remain within the tax-advantaged retirement system without interruption. It bypasses the need for the individual to handle the funds directly and eliminates the complexities of the 60-day rule and the 20% mandatory withholding. For these reasons, financial professionals typically recommend a direct rollover whenever possible to maintain the tax-deferred status of the retirement savings seamlessly.

Preparing for Your Rollover

Before initiating any retirement account rollover, whether to or from Empower, thorough preparation is necessary to ensure a smooth and compliant transfer. Begin by identifying the specific retirement accounts involved, including the source account from which funds will be moved and the destination account where they will be received. This involves knowing the account numbers for both, as well as the exact names and contact information for the financial institutions or plan administrators managing these accounts.

It is important to understand the eligibility rules of the destination account, as not all retirement plans can accept all types of rollovers. For instance, some employer-sponsored plans may have restrictions on accepting rollovers from certain types of IRAs or other employer plans. Confirming these rules beforehand with the receiving institution, such as Empower, will prevent delays or issues in the transfer process. Gathering detailed information about the account types involved, such as whether they are traditional, Roth, or pre-tax/after-tax funds, is also important for proper processing.

Additionally, ascertain any required documentation or forms that need to be completed for both the sending and receiving institutions. While specific forms vary, they generally request information such as your personal details, account numbers, the type of rollover (direct or indirect), and instructions for fund disbursement. Having this information readily available, including exact addresses and precise fund allocation instructions, will streamline the form completion process.

Initiating a Rollover from Empower

To initiate a rollover of funds out of an Empower account, the process typically begins by accessing their online platform or contacting their customer service directly. Navigate to the section related to distributions, withdrawals, or rollovers, which is usually found within the retirement or account management area of the website. This portal will guide you through the steps to request a transfer of your funds to another financial institution.

When prompted, you will need to specify the type of rollover, choosing a direct rollover to minimize tax complications. You will also provide the details of the receiving institution, including its name, address, and the account number where the funds should be sent. Empower’s system often provides options to generate the necessary forms or initiate the electronic transfer directly from within your account interface.

After submitting your request through Empower’s platform, you should receive a confirmation acknowledging receipt of your instructions. Processing times for rollovers can vary, typically ranging from a few business days to a couple of weeks, depending on the complexity of the transfer and the method of delivery. Empower usually provides a way to track the status of your rollover request online, allowing you to monitor its progress until the funds are successfully transferred to your new account.

Initiating a Rollover to Empower

Bringing funds into an Empower account from another financial institution involves a process that often starts with your previous retirement plan provider. Begin by contacting your former employer’s plan administrator or the financial institution holding your old retirement account to request a direct rollover. Specify that the funds should be transferred directly to Empower to maintain their tax-deferred status and avoid potential tax withholdings.

Your previous provider will likely require you to complete their specific rollover request forms, where you will designate Empower as the receiving institution. You will need to provide Empower’s routing information, account number, and any other identifying details they require to correctly receive the funds. Once these forms are submitted and processed, the former provider will typically issue a check made payable to Empower, or initiate an electronic transfer.

After the funds have been sent by your previous provider, you may need to notify Empower of the incoming rollover. This step ensures Empower is prepared to receive and correctly allocate the funds to your account. Empower generally provides instructions on how to track incoming rollovers, allowing you to confirm that the funds have been successfully received and posted to your account. The entire process, from initiating the request with your old provider to the funds appearing in your Empower account, can take several weeks.

Understanding Rollover Tax Rules

Understanding the tax implications of retirement account rollovers is essential to avoid unexpected penalties or tax liabilities. A direct rollover, where funds move directly between financial institutions, is generally a tax-free transaction. This method ensures the funds retain their tax-deferred status without being considered a taxable distribution by the Internal Revenue Service (IRS).

In contrast, an indirect rollover, where you receive the funds directly, is subject to specific tax rules. You have 60 days from the date you receive the distribution to roll the funds into a new qualified retirement account. If you fail to complete the rollover within this 60-day period, the entire amount becomes taxable as ordinary income, and if you are under age 59½, it may also be subject to an additional 10% early withdrawal penalty.

Furthermore, indirect rollovers from employer-sponsored plans are generally subject to a mandatory 20% federal income tax withholding. This means that if you receive a check for an indirect rollover, 20% of the distribution will be withheld for taxes. To roll over the full original amount, you must use other funds to cover this withheld portion, and you can recover the withheld amount when you file your federal income tax return. Roth rollovers, including Roth 401(k) to Roth IRA rollovers, are generally tax-free, but a Roth conversion from a traditional pre-tax account to a Roth account is a taxable event in the year of conversion.