Capitalize Overview

Capitalize is a free web-based service that can assist a user with a 401(k) or 403(b) rollover to an individual retirement account. This service is useful for anyone planning a retirement account rollover and not wanting to deal with the phone calls, messages, paperwork, loss of time and uncertainty of doing it all on their own.

                By                    Thomas Streissguth

  • Overview

  • How It Works

  • Cost

  • Tax Savings

  • Finding Assets

  • Security and Customer Service

  • Comparable Options

  • Who It’s Best For

  • Cost

  • 5.0

  • Tax Savings

  • 5.0

  • Finding Assets

  • 4.0

  • Customer Service

  • 4.0

Pros

  • Free service
  • Saves hassle and taxes
  • Step-by-step guidance
  • Finds orphaned or forgotten retirement accounts

Cons

  • No phone customer service
  • Limited to 401(k) and 403(b) IRA rollovers
  • Needs sensitive personal and financial information

The company charges no fees or subscriptions but earns commissions from its partner IRA providers. These providers help Capitalize users roll their 401(k) balances into an IRA account.

Users aren’t bound to a Capitalize partner for their rollovers and are free to go with another company if they want. The platform does not handle rollovers to new 401(k) or 403(b) accounts.

How Financial Tools for Retirement Investing Typically Work

Three important vehicles for preparing for the financial future are the IRA and the 401(k) or 403(b).

An IRA is used by individuals as a tax-advantaged retirement savings account. The individual is responsible for selecting the brokerage that handles the account, which can hold stocks, bonds, mutual funds, cash and other assets.

The 401(k) is an employer-sponsored benefit offered by companies as a way for their workers to save money for retirement. A 403(b) is a similar savings plan for employees of schools and religious and tax-exempt organizations. The employer chooses the provider and the assets employees can invest in, so the individual has less control over the assets than in an IRA.

How Capitalize Works

If an employee leaves a job, an important decision must be made on what to do with the 401(k). The account can’t be transferred, but the money and investment assets can be rolled over into a new account. When you choose for that new account to be an IRA, Capitalize can help you select a provider.

Once you register with the Capitalize site, you simply need to identify your former employer. If you are unsure about which brokerage or financial institution manages the 401(k) account, Capitalize will search its own database or have a representative call the former employer to collect the information.

Capitalize works for any employee who’s leaving a job and transferring their 401(k) or 403(b) assets to a new or existing IRA account.

Choosing a New IRA Provider

A big part of this process is selecting an IRA provider and deciding how you want your account managed. Capitalize offers information on the various types of IRAs, including traditional, Roth and self-directed, to help you decide which is best for your retirement goals. It also explains what you can expect in terms of fees, whether you manage the assets yourself or use a robo-advisor or financial advisor to build and manage your portfolio for you.

The Capitalize website also offers guidance on selecting an IRA provider. By asking a series of questions about your preferences, Capitalize will direct you to a list of options so you can compare fees, investment options and other features. Once you have selected an IRA provider, Capitalize will assist you with opening the new account.

IRA Partners

Capitalize partners include big names in investment brokerages, including Schwab, Vanguard, Fidelity, TD Ameritrade, Merrill Lynch and SoFi, among others. Going with a major national brokerage should offer some peace of mind over the issues of security, accessibility and customer service. But the IRA doesn’t have to be with a Capitalize partner, and there’s no fee charged by Capitalize either way.

The whole process should take at most a few weeks, and usually is much quicker. At any time, the user can contact Capitalize or the IRA provider to track the status. Interruptions, delays and problems can arise, of course, and it’s helpful to have an outside party following the rollover and providing advice if needed.

Cost

Capitalize is a free web-based service that can assist a user with a 401(k) or 403(b) rollover to an IRA. The company charges no fees or subscriptions but earns commissions from IRA providers for bringing them new clients. The platform does not handle rollovers to new 401(k) or 403(b) accounts.

Good To Know

Many workers face the choice of moving their savings to an IRA, which they own as individuals, or a 401(k) or 403(b), which are managed by the employer’s choice of bank or financial company. The IRA typically allows more control over the assets, while employer-sponsored accounts leave investment options and activity largely up to the employer and manager.

The user may select a Capitalize partner as their new IRA provider. They’re also free to go with another company.

Tax Savings

There are several important factors involved when doing a rollover. Uppermost is the possible tax penalty imposed on the process by the IRS.

The IRS must be notified of any rollovers and will impose a fee on rollovers that aren’t completed within a certain timeframe. The IRS might also tax a rollover that goes into a Roth IRA, which, unlike a traditional IRA, does not allow a tax deduction on new contributions. In the case of a traditional IRA, there should be no tax or withdrawal penalty involved.

With people changing jobs more frequently, rollovers have become pretty commonplace. But it’s not unusual to get snagged on the details and procedures. Capitalize was designed to save users that headache and ensure there won’t be any tax payments due.

Finding Assets

Many workers with 401(k)s have trouble moving their savings when they leave their jobs. By Capitalize’s own estimate, millions of accounts are “orphaned” each year, meaning they’ve been essentially forgotten by their owners.

In some cases, the employer changed 401(k) providers, while in others, the company was bought out and its employees’ savings were moved to a new provider. 

It’s also possible that a balance of less than $5,000 was moved into an IRA at another provider. This is known as a forced rollover and is allowed when an employee does not indicate a choice of a new 401(k) provider. A forced rollover can mean a big loss to the account owner when fees are factored in.

Capitalize assists users by searching for any forgotten 401(k) accounts, whether they’re still active or not. These assets can be consolidated into the new IRA.

Security and Customer Service

Of course, in signing up for Capitalize, users have to work with a third party in the rollover transaction. Security in any web-based financial transaction is an important concern.

Capitalize reports that it is SOC 2 compliant. This reporting method, developed by the American Institute of CPAs, notes the security protections and compliance by third-party vendors used by organizations for their financial services.

In addition, Capitalize claims to use bank-level encryption to protect the financial and personal data of its users. It will ask for some personal information during the process, including age, gender, country, home address, e-mail address, phone number and date of birth. Capitalize also requires information about financial accounts, including access to these accounts through passwords and password hints.

Capitalize provides customer service in the form of a chatbox on the web page.

Comparable Rollover Options

Capitalize was founded in 2019 by Gaurav Sharma and Christopher Phillips and provides 401(k) rollover assistance on a scale that is otherwise unavailable. Other platforms, such as Schwab, Merrill, TD Ameritrade and Fidelity, offer information and some assistance in transferring funds to accounts with their companies.

The internet also offers plenty of informational sites on the subject of rollovers, and books by financial gurus such as Suze Orman and Dave Ramsey can guide readers on their options in handling retirement funds. However, Capitalize makes it possible to personalize and compare rollover options from one place.

Capitalize: Great for Those Comfortable Making Financial Decisions Online

It isn’t necessary to use Capitalize or any other third-party financial consultant to carry out a rollover. It can be done with the help of an employee benefits manager or through contact with the financial institution selected to handle the new account.

But the DIY version of a rollover involves filling out forms, mailing paperwork, checking old and new account statements and keeping on top of the process as it unfolds — usually over the span of a week or more. Aggravating and unexplained delays are common when life savings are moved from one handler to the next.

Capitalize promises to ease that process. It’s attractive for users who are comfortable making an important financial decision online and allowing a web-based company to handle the details.

Daria Uhlig contributed to the reporting for this article.

Frequently Asked Questions

  • With a comprehensive list of 401(k) providers, Capitalize can find old 401(k)s along with any currently open and active ones, consolidating them into a single IRA that’s easy to track and manage.

  • Financial management companies have a wide range of products and services, and their primary interest is gathering the maximum amount of assets to manage – a possible sales incentive for any new IRA manager. Capitalize specializes in a specific transaction and can attend to this function without regard to the size of the account.

Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.

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