Dear Liz: I recently changed jobs and realized that I had several 401(k) accounts from previous employers over the years that needed to be consolidated.
When I contacted my current employer’s 401(k) administrator to understand the rollover process, they told me that I would actually have to get a paper check mailed to me for each previous employer and then arrange for their send checks. Liz, we’re talking about four checks totaling a very substantial sum of money! They said there was “no other way” to deal with bearings. I don’t understand why we are still dealing with such an archaic process these days.
Should I be worried or should I just deal with this now since I don’t seem to have much say in the process?
Answer: You should definitely be concerned, nor should you assume that your employer’s 401(k) administrator understands other companies’ options. Receiving a check in the mail from an old plan is not only dangerous, but triggers a 20% hold requirement.
If you want to avoid taxes and penalties on the missing 20%, you’ll have to find that money out of your own pocket. (If you didn’t deposit the check with the new plan or into an IRA, you’ll have to pay taxes and possibly penalties on all the money.)
When you contact the administrators of the old plan, ask them if they can “roll directly” into your new 401(k) account. Often the transfer can be done electronically.
Even though the old plan uses a paper check and US mail to deliver the funds, you can avoid the 20% hold requirement if the check is made payable to your new account rather than to you.
Dear Liz: Can I buy a US Treasury bill myself or do I have to go through a bank or financial advisor?
Answer: You can buy government-issued securities, including treasury bills, bonds and notes, from Cash Direct, which is managed by the US Treasury Department. Creating an account usually only takes a few minutes, but you’ll need a valid social security number, US address, and checking or savings account to complete the process.
You can also buy treasury bills on a brokerage account. You can buy a treasury bill in what’s called the secondary market, where securities are bought and sold, or you can invest in a treasury money market mutual fund or a treasury exchange-traded fund.
Liz Weston, Certified Financial Planner, is a personal finance columnist for Nerd Wallet. Questions can be sent to him at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.