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When you leave a job, you are often faced with a decision about your 401(k) or other retirement plans. At your direction, your employer can transfer your distribution directly to another qualified plan or to a rollover individual retirement account (IRA).
A rollover is when you withdraw cash or other assets from one eligible retirement plan and contribute all or part of it within 60 days to another eligible retirement plan. Under this option, you would direct your plan administrator to make a direct and tax-free transfer of funds from your former employer’s plan to a rollover IRA at a financial institution of your choice. That way, you maintain the tax-deferred status of your retirement account, consolidate all retirement accounts for easier management and benefit from increased investment flexibility.
When deciding which financial institution to roll your 401(k) assets into, research the incentive matches and bonuses that some companies offer and be sure to read the fine print in great detail. Most of the bonuses require you to deposit money within 60 days of opening the account. All require the account to remain open and fully funded with the initial bonus amount for at least 12 months, or they can reverse the bonus amount.
Fidelity has become an excellent resource for investors seeking a wide variety of investment options and services with a relatively low fee structure. The company offers one of the higher dollar matching rates out of any financial institution.
However, unlike most other institutions that offer a flat dollar or percentage matches on assets that are rolled over, Fidelity matches based on additional contributions over the next three years. To qualify, you must first open a rollover IRA through Fidelity. The match rate is determined by the initial dollar amount you roll into your new Fidelity IRA. Below is the table of the transfer amount and the corresponding match rate.
- $10,000 = 1%
- $50,000 = 1.5%
- $100,000 = 2.5%
- $250,000 = 5%
- $500,000 = 10%
The maximum amount of total matching that Fidelity is willing to contribute is 10% for the next three years. For example, if you roll over $500,000 from an old 401(k) plan, you would be eligible for a 10% match if you contribute for the next three years.
In 2019, if you are age 50 or older, the maximum contribution for an IRA is $7,000 ($6,000 + the $1,000 catch-up). For each contribution of $7,000, Fidelity matches 10% or $700 into the account. If you contribute the maximum amount for three years (a total of $21,000), Fidelity will match a total of $2,000. Obviously, a higher initial rollover would determine a higher match, but this should be an excellent incentive if you are looking to move assets from an old 401(k).
If you are interested in rolling assets into a self-managed trading financial institution, TD Ameritrade would be an excellent option. The company offers six different thresholds for its bonus program besides offering the largest cash bonus out of all the IRA rollover incentive programs in the industry.
At a minimum, if you roll at least $10,000 into an IRA, you would qualify for 90 days of commission-free trades (up to a maximum of 300 trades). If you have a very large 401(k) or retirement plan to transfer, TD Ameritrade is willing to add a bonus of $2,500 into your new rollover IRA. Below are the threshold levels and corresponding cash bonus amounts.
- $2,500 cash bonus for $1 million deposit
- $1,200 cash bonus for $500,000 deposit
- $600 cash bonus for $250,000 deposit
- $300 cash bonus for $100,000 deposit
- $100 cash bonus for $25,000 deposit
Scottrade is an online brokerage tailored for the do-it-yourself investor offering several different tools and advanced platform solutions that rival most major investment firms. The company also offers excellent online support through its website and mobile application allowing you to easily execute trades through your smartphone.
Scottrade has a very similar cash bonus program to TD Ameritrade’s, although the latter is specific to rollover IRAs. Scottrade’s program works for any type of deposit, either qualified or non-qualified assets.
At a minimum, if you deposit or roll over $10,000 to $24,999 into a Scottrade account, you will be entitled to 50 free trades. Below are the qualifying deposit amounts and the cash bonuses that Scottrade will deposit:
- $2,000 cash on qualifying deposits of at least $1 million
- $1,000 cash on qualifying deposits of $500,000–$999,999
- $600 cash on qualifying deposits of $250,000–$499,999
- $300 cash on qualifying deposits of $100,000–$249,999
- $200 cash on qualifying deposits of $50,000–$99,999
- $100 cash on qualifying deposits of $25,000–$49,999
Merrill Edge is the self-directed investment subsidiary of Bank of America and the brokerage company Merrill Lynch Wealth Management. Merrill Edge has seen success through its cross-selling to current Bank of America clients who report finding it easy to incorporate its services into their current bank accounts.
Similar to Scottrade, Merrill Edge will pay a cash bonus if you deposit a qualifying amount into either an IRA or non-qualified account called a cash management account (CMA). If you deposit a minimum of $20,000, Merrill Edge offers 300 commission-free trades for 90 days and a cash bonus of $100. Below is the list of the qualifying asset deposit levels and cash bonus amounts.
- $600 cash on $200,000 and up
- $250 cash on $100,000
- $150 cash on $50,000
- $100 cash on $20,000
Ally Bank is a popular choice for customers seeking higher-than-average yields on its certificate of deposit and savings accounts. This online bank offers no maintenance fees on savings, checking, money market and certificates of deposit. In February 2019, Ally offers a variety of CD maturity options, ranging from three-month to five-year options, and offers cash bonuses on rollovers from a 401(k).
- • $500 cash on $200,000 or more
- • $250 cash on $50,000-$199,999
- • $100 cash on $25,000-$49,999
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