What Is a 401(k) Rollover?

A 401(k) rollover allows you to move your retirement savings from one account to another—such as from an old employer’s 401(k) into an IRA or a new employer’s 401(k). Doing this correctly helps maintain your tax advantages and keeps your money growing for retirement.

Should I Leave My 401(k) with My Former Employer?

In some cases, keeping your 401(k) where it is might be the best choice—especially if:

• The plan has low fees and strong investment options.
• You want to move the funds to a new employer’s plan later.
• You don’t want to manage multiple accounts.

However, some plans have a force-out provision, meaning your former employer could automatically move your funds to an IRA if your balance is under a certain threshold.

When Should I Roll My 401(k) Into a New 401(k)?

You typically become eligible for a 401(k) rollover when you experience a distributable event, such as:

• Leaving your job (voluntarily or involuntarily)
• Retirement
• Your employer’s plan is terminated

Some distributions, such as Required Minimum Distributions (RMDs) and hardship withdrawals, are not eligible for rollover.

When Is an IRA Rollover the Best Choice?

An IRA rollover might be right for you if:

• You want more investment choices beyond what’s offered in a 401(k).
• You’re looking for lower fees and more control over costs.
• You want to consolidate multiple retirement accounts into one IRA.

What Should I Know About Rollovers If I’m Close to Retirement?

• RMDs & Withdrawals – At age 73 (or 75 if born in 1960+), Required Minimum Distributions (RMDs) apply. If retiring at 55+, you can withdraw from a 401(k) penalty-free, but rolling into an IRA shifts that age to 59½.
• Investment & Fees – 401(k)s may offer lower fees, while IRAs provide more investment flexibility. Compare costs and options before rolling over.
• Tax Strategy & Roth Conversions – Converting to a Roth IRA can lower future taxes, but conversions are taxable upfront. Timing is key.

What Are My Rollover Options?

There are two primary ways to roll over a 401(k):

• Direct Rollover – Your funds are transferred directly to your new 401(k) or IRA without tax consequences.
• Indirect Rollover – You receive the money and must deposit it into a new retirement account within 60 days to avoid taxes and potential penalties. Be aware: 20% of your distribution will be withheld for taxes, which you’ll need to replace when depositing the full amount. 

Who Is Eligible for a 401(k) Rollover?

You typically become eligible for a 401(k) rollover when you experience a distributable event, such as:

• Leaving your job (voluntarily or involuntarily)
• Retirement
• Your employer’s plan is terminated

Some distributions, such as Required Minimum Distributions (RMDs) and hardship withdrawals, are not eligible for rollover.

How Do Roth 401(k) Rollovers Work?

If you contributed to a Roth 401(k) (which grows tax-free), your rollover options are more limited:

• You can roll it into a Roth IRA—which allows for tax-free growth and no RMDs.
• You can roll it into a new Roth 401(k) (if your new employer’s plan allows).
• You cannot roll it into a traditional IRA or 401(k).