Let me start from the very beginning. One of the first things that I did when I started planning for my future was that I began investing in a 401k. Like a lot of new investors, I didn’t know much more than the fact that I needed to save money. It didn’t take long for me to learn about all of the benefits that a Roth 401K had to offer. After learning this, I decided that all of my future contributions would be made into a Roth 401k.
In the end it proved to be a very profitable decision for me. Even if everything didn’t end up going the way that I had planned.
I continued to contribute in that Roth 401K for the next 7 years. During the first year, I only contributed 5% of my income and I was only contributing that so that I could get the full company match. Over the nexxt couple of years, I bumped that total up in small increments until it had reached the 12% to 15% range.
This proved to be a very wise decision.
Now after 7 years of working for the same company, I decided to change jobs. After changing jobs, I started looking into my options for consolidating some of my assets in my 401k accounts. That was when I stumbled upon a discovery of something that I had to deal with but had not planned for in my 401k planning.
While speaking with the soon to be custodian of my 401K, I found out that they only accepted rollovers from traditional 401K accounts but they did not accept rollovers from Roth 401K accounts. This seemed to be going just as I had planned but the curveball was soon to come.
Then, I called to speak with the old custodian of my 401K to find out what I needed to do to initiate the rollover into my Roth IRA. That was when I made the discovery that I did not have all of my money in a Roth 401K account.
So here is what I learned. When you contribute your money into a Roth 401K, your company matches you into a traditional 401K…. wait WHAT?!?! That was a huge shocker to me.
I had not planned for my 401K money to be divided into 2 very different type of retirement accounts. I had anticipated being able to roll the whole amount over into either a new Roth 401K or a Roth IRA.
This new information ended up forcing me to rollover less than half of the money into a Roth IRA while I rolled over more than half into a new traditional 401K.
It is not that big of deal because it is not like I lost any money. It will affect my financial planning for the future.
Currently, I am still contributing to my new Roth 401K but if this new bit of information stands true than my company is actually matching me into a traditional 401K. I will definitely keep this in mind.
If you have ever had any crazy experiences with moving money from a 401K account, I would be very interested in hearing about it.
As always I look forward to reading all of your comments and questions, until then….. happy investing!
-Jason from MoreDividends.com
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