Many people wonder how to rollover a 401k into an IRA. First, consider your options. Do you really need to roll it over into an IRA?
Option 1:If your 401k balance is over $5000, your previous employer is required by law to let you keep your money in their 401k plan.
Option 2: Take the money now, and pay the taxes an penalties. This is a dumb move!
Option 3: Roll it over into your new employr’s 401k plan or into an IRA. You want to make sure you NEVER touch the money!
If rolling over your 401k into a new 401k You need to do a trustee-to-trustee transfer. You would need to contact the company that runs you new 401k plan to initiate the transfer.
If you want to roll the money into an IRA, you can either roll it into an existing IRA, or set up a new IRA. Rolling into into a separate IRA has advantages that you can later roll it into a new employers 401k plan (if the company allows this). If you roll your 401k into an existing IRA or make contributions to the separate rollover IRA, you may no longer mover the funds into a new employer’s plan.

You can also optionally have your previous employer write you a check for the 401k balance. But they will have to withhold 20% for income taxes. You will get the 20% back at tax time via a tax refund. But meanwhile you must deposit 100% of the balance from your previous employers 401k plan into the new account within 60 days. If you deposit any less the 100%, it will be seen as a withdrawl, and you will have to pay taxes, and penalties. But since the IRS is holding 20%, you only have 80% of the balance. You would have to come up with the remain 20% to deposit into the new account. Ouch!

Before making any decisions about the rollover of a 401k into an IRA or another 401k, you should talk to your financial planner or accountant.