What’s Shakin’,

This is the Master Money Newsletter. The newsletter that makes financial knowledge more accessible than your grandmas candy drawer. Even though it was fill with candy orange slices and Werthers. But when she had the good stuff, it slapped.

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Here’s what we have on deck today:

• The Step-By-Step Guide to Rollover your 401(K)
• Read the latest news in less than 30 seconds.
• Watch the 3-Fund Portfolio VS. The S&P 500

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Numbers to Know

💳The IRS has issued nearly 8 million refunds worth about $15.7 billion. As of Feb. 3, the average refund amount was $1,963, down from $2,201 at the same time last year.

🤮Newlyweds may have a higher tax bill this year because of the marriage tax penalty which can be as high as 12%!

📈Retail sales are up 3% in January. Not everyone is worried about a looming recession.

💻 If you have lost your old 401(k), you can use this nifty tool to find it. 25 million people do not know where there old 401(K) is.

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On our Monday Episode of The Personal Finance Podcast, we break down what to do with your 401(K).

25 Million 401(K)’s have been abandoned in the U.S. I want to make sure that does not happen to you. Follow this guide for a full breakdown of how to roll over your 401(K).

STEP 1: Confirm a few key details about your old 401(k)

First, get together any information you have on your old 401(k). It’s okay if you don’t have a ton, but any details like an old account statement you got in the mail or an old e-mail from your former HR team can help.

401(k) paperwork can be confusing. Don’t get overwhelmed. We are going to make it easy as pie. This is all the information you really need.

1/ Who is the 401(k) “provider”? The provider is just the bank or brokerage where your 401(k) account is located. Think of Fidelity, Vanguard, or Charles Schwab. It’s usually a large financial company chosen by your employer and their logo appears on any old 401(k) statements you have. If you aren’t sure you can use this nifty tool called the find your 401(k) tool​

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​2/ Do you have a Traditional or Roth 401(k)? This will determine which type of IRA you’ll need to open (more on this in step 2). Most people have a traditional 401(k). This is the default option most plans provide.Here is a fun stat you can pass around the water cooler. Only 12% of 401(k) plans even offer a Roth 401(k), but it’s worth checking. Although it is my favorite account of the two. What’s the difference between the two? Just the way your contributions were taxed. With a Traditional 401(k) your contributions came out of your paycheck with no taxes paid. But, you pay taxes when you take the money out. With a Roth 401(k) your contributions came out after taxes were paid.

3/ What’s your bank or brokerage phone number? Remember this is the provider in #1. Keep this handy since you’ll need it later on in the process when you initiate your rollover.

✋ Quick Question: What if I do not have any information on my 401(K)?

Don’t sweat it. Just email, call, or mail, your old employer's HR department. They will know this information because your 401(k) provider is chosen by your employer.

STEP 2: Decide where you want to move your hard-earned money.

In order to move the money out of your 401(k) account, you’ll first need to have an account opened for that money to move into. Thinks of this like moving from a house. You first need to have another place to live before you move out of your house.

You have two main options:

1/ An IRA: an IRA is an “individual retirement account”. This it’s an account you open up on your own and it isn’t connected to an employer. If you have listened to the podcast for any amount of time you have heard me talk about this. This is a great flexible option.

2/ A new 401(k) — you might have an active 401(k) account with a current employer. If so, you may be able to transfer your old 401(k) savings into that current account. This isn’t always possible though, and you’ll need to check with your current 401(k) provider and HR department to get all the details. This is best if you like the investment options your new company has. If they have high fees or terrible investment options, then an IRA will work just fine.

🙅‍♂️Common Myth: Some people think combining the money in one account will allow it to compound faster. It won’t.
Most people end up rolling over to an IRA instead of their new employer. Full Disclosure: This is what I personally did. Here is why:

You are not tied to any employer — IRAs are generally easier to keep track of since they’re opened by you at a brokerage of your choice like Fidelity, Vanguard, or M1 Finance.

Better Investment Options —Let’s get real, your 401(k) usually has crappy investment options. Sometimes they only have high fee options (You know I hate fees!). That is why opening at the brokerage or bank of your choice is the most flexible option. You choose the place you want it to go with your favorite investments.

Faster Process — When I rolled over into an IRA, it took me less than 10 minutes.

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​What Type of IRA Should You Open

If you have an accountant or tax strategist, consult with them first on your situation. But here is a quick rundown.

👉If you have a Traditional 401(K) - Then the apples-to-apples equivalent would be an IRA. You will not have to pay taxes when rolling the money over. This is the easiest option.

👉If you have a Roth 401(K)- Then the equivalent would be the Roth IRA. You would not have any taxes to pay by rolling it into the Roth IRA. This is the easiest option.

👉If you have a Traditional 401(K) and Want to Move it to a Roth IRA: This would be a Roth Conversion. You would pay taxes on the money when you convert it over.

STEP 3: Contact your 401(k) provider

The easiest way to do this is by phone. It will get this completed is the least amount of time. I will give you a script on exactly what to say. In order for your call to go smoothly, follow these tips:

👉Set aside 30 minutes and a quiet space in which to make the call. Most of the time the call itself will take around 10 minutes, but sometimes you have to wait around for an operator.

👉If you have an old 401(k) statement, keep it handy. No worries if not – you’ll be asked for your social security number and some other personal details to verify your identity.

Before you do the call, log into your new IRA account. Note down the following information:

1. Your IRA account number

2. The IRA provider’s mailing address. Look for the specific address where they ask for any checks to be mailed.

3. Any other check-related instructions. These details are usually found on the IRA provider’s website in a “Funding” or “Rollover instructions” section and include things like the name of the institution to whom the check is made out (usually the full legal name of the IRA provider you’ve chosen).

4. Then place the call. Be prepared for a little hold time but in our experience, the entire call should take no longer than 30 minutes. You can use my script below.

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​SCRIPT:

“Hi, I would like to do a direct rollover of my 401(K) to an IRA.”

They will ask you for some personal information. Once your identity is verified, here is exactly what to say.

✋ Quick Question: What is a direct rollover?

I am glad you asked. ​​A direct rollover is where your funds are directly transferred to your new IRA provider. It often means the check is made out in the name of that IRA provider but “for the benefit of ” (FBO) you. This is generally the simplest approach.

The opposite would be an indirect rollover where they mail the check to you. This you usually do not want to do because it requires extra steps that if not completed correctly, could mean you have to pay a 10% penalty on your money.

“I would like to do a direct rollover from my 401(k) to an IRA that I have already opened. The new IRA is with Banks Name. The mailing address for the new IRA is State Mailing Address and the account number is State Account Number. I would also like to confirm that you have my current home mailing address so any pertinent documents for this direct rollover will be sent to me directly.”

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​STEP 4:Finish any last transfer steps

In most cases, by this stage, you’re done, and your 401(k) provider has initiated the process of rolling over your 401(k) into your new IRA. If so, congrats you did it!

In rare cases, there can be a small extra step at this stage. Some 401(k) providers will only distribute your 401(k) funds to you, not to your new IRA provider. If that’s the case then they’ll send a check with your money to your mailing address.

Then you just forward that check to your new IRA provider using the mailing details that you’d previously looked up.

How to Rollover to an IRA at various Brokerages

I am also including links to brokerages that I like if you want to see the steps they provide as well, but in most cases the steps above are easiest.

• M1 Finance - Link
• Vanguard - Link​
• Fidelity - Link
• Charles Schwab - Link

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📈 Quick Tip Of The Week

Take some time this week to look at your recurring expenses. I just did this and cancelled over $100 per month of subscriptions I did not want anymore.

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High-Performance Book Club 📚

I get a ton of questions from listeners and readers as to what I am reading. So we decided to let you know via the newsletter. The High-Performance Book Club will be a way to share this. If you want to be Elite in your career, business, or with your wealth, then welcome to the club. If you would like to see our previous picks, you can find them here.

​https://kit.co/MasterMoney/high-performance-book-club​

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The Personal Finance Podcast 🎙️ ​ ​

​What to Do With Your Old 401(K) (Step-By-Step!)​

​From Police Officer to Multimillionaire investing in ATM’s (With Paul Alex)​

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