When most people consider rolling over one retirement account to another, it’s because they are leaving their current employer and want to take their money with them.
Even though in most cases they can leave their money with their employer’s retirement fund company, they often want to rollover the funds to an IRA or their new employer’s retirement plan. However, on occasion, some people want to learn how to rollover IRA to 401k. If you find yourself in this situation, you might not be able to find a lot of information on it because it is rarer than other types of rollovers.
For your convenience, here are some tips on rolling over your IRA to a 401k.
When Rolling Over IRA to 401k Makes Sense:
If you are reading this, then you are probably looking to rollover IRA to 401k because you are newly employed with a company that offers a 401k plan and you already have an IRA that you would like to combine with the new plan. This is typically a good move because 401k plans generally offer higher growth potential, although as with any retirement account there are still risks associated with investing in any plan. However, not every 401k plan allows for IRA rollovers. Some of them only allow you to deposit funds directly from your paycheck.
If your 401k plan does allow outside transfers, then it is time to take a look at whether or not you should perform the rollover. To determine whether or not it would be beneficial for you to rollover your IRA funds into your new 401k plan, you need to review the 401k prospectus to find out if the funds offered by the company are outperforming the ones you have been investing in with your IRA. If you find that the 401k has better performance, then you can proceed with the request to rollover IRA to 401k.
How to Rollover IRA to 401k:
You will have to count the funds you roll over from your IRA to the 401k toward your annual contribution limit, so make sure you do not go over the maximum amount allowable by the IRS. This information can be found here. You should also separate old 401k rollovers from your IRA funds. The IRS only allows you to transfer IRA funds to a 401k if you are transferring the exact amount of withdrawals made from a former employer-sponsored account.
Contact your IRA administrator and request a direct deposit form. This will allow you to provide the account information for your 401k to make sure the transfer process is expedited. You should not have the money transferred to you first, as it will complicate and extend the process. It is far better for you to have the rollover done directly between your IRA administrator and the new 401k company. Before you request the transfer, make sure your 401k account is fully established with your new company. You will know it has been completely set up because your 401k will reflect a deposit from your first paycheck.
It is really that simple to rollover IRA to 401k. Although it doesn’t happen as often as rolling over a 401k to an IRA, it is done frequently enough that both your IRA administrator and the 401k company will be able to handle it without any issues. Then, you can sit back and watch your money grow in your 401k.
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