What to Know Before Making Your 401(k) Rollover Decision

Okay, let’s get into it.

The 401(k) rollover decision hit me like a freight train last month when I opened a random envelope from my old job at the ad agency I left in 2021. There it was—$87,432 just chilling in a plan I forgot existed. And honestly? My very first thought was “cool, free money,” which tells you exactly how clueless I was walking into this 401(k) rollover decision.

Why My First 401(k) Rollover Decision Was Straight-Up Dumb

I almost did the classic bonehead move: requested a check made out to me because “it’s easier.” Like, I literally clicked the button. Thank God the HR lady called and was like “hey, you sure?” Because if that check had come to me instead of directly to the new IRA, the old plan would’ve withheld 20% for taxes automatically. Twenty. Percent. That’s $17k gone before I even touched it. And then I’d have 60 days to come up with that missing chunk from my own pocket or bam—taxes + 10% penalty since I’m only 38. I would’ve been eating ramen until 2027.https://investor.vanguard.com/accounts/rollover-ira

The 401(k) Rollover Rules Nobody Tattoos on Your Forehead

Here’s the raw truth I learned while stress-eating Flamin’ Hot Cheetos at 2 a.m.:

• Direct rollover (trustee-to-trustee) = zero tax withholding, no 60-day clock, life is good.
• Indirect rollover (check to you) = they withhold 20%, you’ve got 60 days to deposit the full amount (yes, including the 20% they kept), or the IRS treats it like you cashed out.
• One indirect rollover per 12 months. Only one. I didn’t know that either until I almost did two in the same year like an idiot.
• If you’re doing Roth conversion as part of the rollover? You’re paying taxes on every dollar converted this year. Ask me how I learned that the hard way when I accidentally converted $20k extra. https://www.fidelity.com/retirement-ira/401k-rollover-ira

My Actual 401(k) Rollover Decision Play-by-Play (With Regrets)

So here’s exactly what I ended up doing after three straight days of Googling and crying in my minivan:

1. Left the $87k exactly where it was for two weeks while I opened a traditional IRA at Vanguard (because lower fees than Fidelity for my weird index-fund obsession).
2. Called the old plan (Procter & Gamble’s plan run by Fidelity—shoutout to the nicest rep ever) and requested a direct rollover. Took 20 minutes.
3. Checked the box that says “make check payable to Vanguard FBO [my name]” so it never touches my hands.
4. Got the confirmation PDF and immediately uploaded it to my Google Drive folder labeled “Adulting I Guess.”

Still waiting for the money to show up—supposedly 7-10 business days. I refresh the Vanguard app like a psycho.

The One 401(k) Rollover Mistake I’m Still Sweating 401(k) rollover decision

I almost rolled everything into my current employer’s 401(k) because “simplify, bro.” But their expense ratios are trash (0.67% vs. 0.04% at Vanguard). That’s literally thousands of dollars over decades for zero reason. Sometimes keeping the old 401(k) or rolling to an IRA is the power move, even if it feels like more accounts.https://www.irs.gov/publications/p590b

Should You Roll Over Your 401k? My Hot Mess Take 401(k) rollover decision

Look, I’m not a financial advisor (obviously—see: Cheetos dust on legal documents). But from one chaotic American to another:

• If your old plan has high fees → run, don’t walk, to a rollover IRA.
• If you love the old plan’s investments (some have institutional funds you can’t get elsewhere) → maybe leave it.
• If you’re between 55 and 59½ there’s this weird rule of 55 thing that lets you pull from the 401(k) penalty-free—IRAs don’t have that.
• Backdoor Roth people: sometimes you gotta roll to IRA first anyway.

I still don’t have all the answers. My IRA is still at $0.00 while the check’s “in the mail.” But at least I didn’t torch seventeen grand in taxes, so… small victories?

Anyway, if you’re staring at your own surprise 401(k) statement right now, just breathe. Call the 800 number. Ask the dumb questions. And whatever you do, don’t let the check come to you unless you’ve got the extra 20% lying around (I definitely don’t).

Talk soon—probably from the Meijer parking lot again.

P.S. If you want the checklist I finally made for myself after all this chaos, DM me on Twitter @literallyjustkat or whatever, I’ll send it. No funnel, no signup, just not wanting you to yeet your money like I almost did.

Useful links I actually used instead of random blog posts:

• IRS Rollover Chart (straight from the source): https://www.irs.gov/pub/irs-tege/rollover_chart.pdf
• Vanguard’s rollover page (because they made it brain-dead simple): https://investor.vanguard.com/accounts/rollover-ira
• Fidelity’s version if that’s your jam: https://www.fidelity.com/retirement-ira/401k-rollover-ira