How to Roll Over a 401(k) Into an IRA in 3 Ways

When you leave a job, an old 401(k) often stays behind with your former employer's plan. Moving that money into an IRA keeps your retirement savings in one place and keeps the tax-deferred status intact, if the move is done correctly. The IRS describes three ways to complete a rollover, and the method you choose changes whether taxes are withheld along the way.

Summary

A rollover means depositing a retirement plan distribution into another retirement plan or IRA. When you roll over a distribution, you generally do not pay tax on it until you withdraw it from the new plan. If you do not roll over the payment, it will be taxable, apart from qualified Roth distributions and amounts already taxed, and you may also face additional tax.

The simplest path is a direct rollover, where your plan administrator pays the money straight to your new IRA and no taxes are withheld. A trustee-to-trustee transfer works the same way for IRA-to-IRA moves. The third path, a 60-day rollover, sends the payment to you first, and that route comes with withholding and a deadline.

Method	How it works	Withholding
Direct rollover	Plan pays your new IRA directly	None withheld
Trustee-to-trustee transfer	IRA firm pays another IRA directly	None withheld
60-day rollover	Payment comes to you, then you deposit it	Taxes withheld

The table shows why the direct route is usually the easiest choice. Money that never passes through your hands avoids withholding entirely, so there is nothing to make up later.

1. Ask for a direct rollover

For a distribution from a retirement plan, ask your plan administrator to make the payment directly to another retirement plan or to an IRA. Contact the plan administrator for instructions on how to request it.

The administrator may issue the distribution as a check made payable to your new account. That still counts as a direct rollover, and no taxes are withheld from the transfer amount. A check payable to the receiving plan or IRA is not subject to withholding.

This method keeps the full amount moving. Because nothing is withheld, you do not need other funds to complete the rollover. If your eligible rollover distribution from a plan is $200 or more, the plan administrator must provide a notice of your rollover rights and must facilitate a direct transfer to another plan or IRA.

2. Use a trustee-to-trustee transfer for IRA moves

If you are moving money from one IRA to another, ask the financial institution holding your IRA to pay directly from your IRA to the other IRA or to a retirement plan. This is called a trustee-to-trustee transfer, and no taxes are withheld from the transfer amount.

Direct transfers of IRA money are not limited by the one-rollover-per-year rule. That rule applies only to rollovers where the money passes through your hands, so a trustee-to-trustee transfer offers more flexibility if you move accounts more than once.

Consider this method first whenever both accounts are IRAs. It avoids withholding, avoids the 60-day deadline, and avoids the annual rollover limit in one step.

3. Understand the 60-day rollover before using it

If a distribution from an IRA or a retirement plan is paid directly to you, you can deposit all or part of it in an IRA or a retirement plan within 60 days. You have 60 days from the date you receive the distribution to complete the rollover.

Withholding applies on this route. A retirement plan distribution paid to you is subject to mandatory withholding of 20%, even if you intend to roll it over later. An IRA distribution paid to you is subject to 10% withholding, and you can elect out of withholding or choose a different amount.

Because taxes are withheld, you need other funds to roll over the full amount. The IRS gives an example in which a person receives a $10,000 distribution with $2,000 withheld. To roll over the full $10,000, that person must add $2,000 from other sources. Rolling over only the $8,000 received leaves the $2,000 withheld as taxable income, plus possible additional tax on early distributions.

The IRS may waive the 60-day requirement in certain situations if you missed the deadline because of circumstances beyond your control. That waiver is an exception, not a plan, so treat the 60-day window as firm when you schedule the move.

What can and cannot be rolled over

Not every distribution qualifies. From an IRA, you can roll over all or part of any distribution except a required minimum distribution or a distribution of excess contributions and related earnings.

From a retirement plan, you can roll over all or part of any distribution except:

required minimum distributions
loans treated as distributions
hardship distributions
distributions of excess contributions and related earnings
a distribution that is one of a series of substantially equal payments
withdrawals electing out of automatic contribution arrangements
distributions to pay for accident, health, or life insurance
dividends on employer securities
S corporation allocations treated as deemed distributions

Distributions that can be rolled over are called eligible rollover distributions. To receive a distribution from a retirement plan at all, you must meet the plan's conditions for a distribution, such as termination of employment.

Also note the one-rollover-per-year rule for IRAs. You generally cannot make more than one rollover from the same IRA within a 1-year period. The limit does not apply to trustee-to-trustee transfers, IRA-to-plan rollovers, plan-to-IRA rollovers, plan-to-plan rollovers, or conversions from a traditional IRA to a Roth IRA.

How this guide was built

This guide follows the IRS rollover page in order: how to complete a rollover, the one-rollover-per-year rule, eligible distributions, and withholding. The three methods in the table come directly from the IRS list of direct rollover, trustee-to-trustee transfer, and 60-day rollover. Individual situations vary, so no tax outcome is promised. Details that the IRS page does not cover, such as state tax withholding and a specific plan's own rules, are best confirmed with your plan administrator.

Choosing order

Open the new IRA first and ask your old plan administrator for a direct rollover to it.
If the money comes from an IRA, request a trustee-to-trustee transfer instead.
If a payment already reached you, deposit the full amount, including any withheld portion from other funds, within 60 days.

Before you finish

Confirm the receiving account is open and ready to accept the rollover.
Confirm whether the payment will go directly to the new account or to you.
Check whether the distribution is an eligible rollover distribution.
Check whether the one-rollover-per-year rule applies to your situation.
Keep the confirmation of the transfer and the tax forms that follow it.

This article is for general information, not financial advice.