Your 401(k) rollover options

Key points

• An eligible pre-tax 401(k) distribution rolled into a traditional IRA or an accepting employer plan generally stays tax-deferred. Moving pre-tax money to a Roth IRA instead creates taxable income.
• A direct rollover pays the receiving retirement account. An eligible taxable plan payment made to you generally has 20% withheld, even if you intend to roll it over.
• The usual deadline for money paid to you is 60 days after receipt. The one-per-12-month IRA rollover limit does not apply to plan-to-IRA rollovers or IRA trustee-to-trustee transfers.
• Leaving money in the old plan can remain an option. A rollover changes more than the account address: fees, withdrawal exceptions, available investments and plan features can change too.

A rollover moves eligible retirement money into another retirement account. It does not automatically mean cashing out, and it does not automatically mean a Roth conversion. The tax treatment depends on the source of the money, its destination and how the payment travels.

The first decision is whether to move it at all. The second is how. Keeping those questions separate makes the paperwork easier to understand.

What can you do with an old 401(k)?

The IRS identifies four broad choices after employment ends: leave the money in the plan if permitted, move it to an accepting new employer plan, move it to an IRA, or withdraw it. These choices do not have the same tax consequences.

Choice	What it does	What to check
Keep the old plan	Keeps the account under that plan’s rules	Fees, distribution options and whether the balance can remain
Roll into a new employer plan	Consolidates eligible money under the receiving plan	Whether it accepts the source account and tax character
Roll into an IRA	Moves eligible money to an individual account	Traditional versus Roth destination, costs and lost plan features
Take the money personally	Makes a distribution available to spend	Income tax, possible additional tax and withholding

A new employer plan is not required to accept rollovers. Opening an IRA also does not prove that every asset or kind of payment can go into it. Eligibility comes first; an account number comes second.

The guide to a 401(k) after leaving a job compares these choices, including small balances and outstanding loans.

Which rollover route are you using?

Three terms describe different transactions.

Direct rollover. A workplace plan pays an eligible receiving plan or IRA. The payment can travel electronically or by a check payable to the receiving trustee or custodian. A properly payable check can pass through your hands without becoming a payment to you.

IRA trustee-to-trustee transfer. One IRA trustee sends money directly to another IRA trustee. This is not the same transaction as a plan distribution followed by a rollover. The distinction matters for the IRA rollover limit.

60-day rollover. You receive the distribution and then contribute eligible money to a receiving retirement account within the permitted period. For an eligible taxable 401(k) payment made to you, mandatory withholding creates a gap between the gross distribution and the cash you receive.

The direct-rollover guide explains payee instructions, partial rollovers and the difference between receiving a check and receiving the money personally.

The IRS issued sample direct-rollover forms in Notice 2026-49, announced on August 12, 2026. Their use is optional for plan sponsors. They are not a mandatory form that every participant can require every plan to accept.

Where can retirement money go?

The IRS rollover chart is a starting map, not permission from a particular plan. An eligible destination still has to accept the money, and special account restrictions still apply.

Money being moved	Common eligible destination	Main limitation
Pre-tax 401(k) money	Traditional IRA or accepting eligible employer plan	A Roth IRA destination makes the pre-tax amount taxable
Designated Roth 401(k) money	Roth IRA or another accepting designated Roth account	It cannot go into a traditional IRA
Traditional IRA money	Another traditional IRA or an accepting eligible plan	Only otherwise taxable IRA amounts can move into an employer plan
Roth IRA money	Another Roth IRA	It cannot be rolled into an employer plan
SIMPLE IRA money in its first two years	Another SIMPLE IRA	The two-year restriction limits other destinations
Eligible governmental 457(b) money	Eligible IRA or accepting plan	Nongovernmental 457(b) plans do not have these rollover rights

A rollover IRA usually describes a traditional IRA funded with employer-plan money. The label does not give it a special tax rate or exempt it from IRA withdrawal rules.

Roth money and non-Roth after-tax contributions are different. A plan can contain both. On the IRS’s after-tax rollover page, a distribution containing pre-tax and non-Roth after-tax amounts can be directed to different destinations: pre-tax money to a traditional IRA and after-tax contributions to a Roth IRA. Earnings on after-tax contributions are pre-tax money.

A partial distribution generally contains a proportional share of the account’s pre-tax and after-tax amounts. It is not simply a withdrawal of whichever tax bucket produces the preferred result. The 401(k)-to-IRA steps show a full-distribution example.

What does withholding change?

Withholding is money sent to the IRS toward your tax bill. It is not the final tax calculation, and it is not a rollover fee.

Hypothetical example. An employee requests an eligible distribution of $100,000, all pre-tax, and no fee is deducted.

Route	Cash delivered	Amount needed for a full rollover
Direct rollover to a traditional IRA	$100,000 to the IRA	Nothing to replace for federal withholding
Payment to the employee	$80,000 to the employee; $20,000 withheld	$100,000 deposited within the rollover period

The second route requires $20,000 from other funds to roll over the entire gross distribution. If only the $80,000 received is rolled over, the remaining $20,000 is not rolled over and is generally taxable.

If that person is under 59 and a half and no exception applies, the additional 10% tax on the unrolled $20,000 is $2,000. Ordinary income tax is separate. The $20,000 withheld is credited on the tax return; the eventual refund or balance due depends on the whole return.

A direct rollover avoids this federal withholding gap. It does not make a pre-tax-to-Roth move tax-free. No withholding and no income tax are different statements.

A taxable Roth conversion or plan-to-Roth rollover also has its own 5-year early-withdrawal clock. Before age 59 and a half, withdrawing amounts attributable to its taxable portion within that period can trigger the 10% additional tax unless an exception applies. This is separate from the Roth IRA clock for qualified distributions.

For money that will actually be kept outside retirement accounts, the 401(k) withdrawal calculator estimates a taxable withdrawal. It does not decide whether a rollover is valid.

Which deadlines and limits apply?

The ordinary 60-day period begins when you receive the distribution, not when you leave the job. A decision to leave an eligible balance in the old plan does not itself start that clock.

IRA-to-IRA rollovers paid to the owner are generally limited to one in a 12-month period across the owner’s IRAs, including traditional, Roth, SEP and SIMPLE IRAs. This is not a separate allowance for every account or a fresh allowance each January.

The IRS lists these transactions outside that one-per-year limit:

• IRA trustee-to-trustee transfers.
• Traditional IRA conversions to Roth IRAs.
• IRA-to-plan rollovers.
• Plan-to-IRA rollovers.
• Plan-to-plan rollovers.

There are exceptions to the ordinary 60-day deadline, including particular waiver procedures and qualifying plan loan offsets. A missed deadline does not become valid merely because the receiving institution accepted the deposit. The 60-day rollover guide covers that separate problem.

Rollover contributions are not ordinary annual IRA contributions. A large eligible rollover does not use up the annual contribution allowance. It also does not create a new deduction for the rolled amount.

What cannot be rolled over?

Some retirement payments are not eligible rollover distributions. Examples include required minimum distributions, hardship distributions and certain corrective payments. A loan treated as a deemed distribution is also different from a plan loan offset that can qualify for rollover treatment.

An RMD is the minimum annual withdrawal required under the applicable rules. If an RMD is due from the old plan, rolling other money to an IRA does not erase it. The RMD calculator can help estimate the amount; the plan confirms what remains due from that plan.

Inherited money needs a separate decision path. A nonspouse designated beneficiary cannot roll a deceased employee’s plan account into the beneficiary’s own IRA. An eligible direct payment can instead go to a properly titled inherited IRA. Surviving spouses have different choices. The owner’s rollover instructions are not a substitute for beneficiary instructions.

What can change after a rollover?

A valid rollover can still remove a useful feature.

Early access. The separation-from-service exception commonly called the rule of 55 applies to qualifying employer-plan distributions, not IRA distributions. Moving the balance to an IRA does not carry that exception along. The rule of 55 guide explains the year-of-separation test and special public-safety rules.

Employer stock. Appreciated employer securities can qualify for special net unrealized appreciation treatment under specific conditions. An IRA rollover can sacrifice that treatment. This is a tax decision about the stock before it moves, not an election to make after the rollover has finished.

Costs. Compare account charges, investment expenses, advisory fees and transaction costs together. The SEC notes that retirement-plan administration expenses can be charged in addition to the costs of underlying investments. Neither an IRA nor an employer plan is cheaper simply because of its account name.

RMD treatment. An employer plan may offer a still-working delay subject to the rules. Traditional IRAs do not offer that delay. A Roth IRA has a different lifetime-RMD treatment, but getting pre-tax money into it creates a conversion-tax question.

Access and protection. Investment availability, loans and creditor protection are not interchangeable across account types. This guide does not decide state-law creditor issues or a particular plan’s contract terms.

What records finish the rollover?

A practical file contains the old account statement, tax-bucket breakdown, receiving-account instructions, distribution election, payment confirmation and receiving-account confirmation. Keep any basis records and employer-stock cost information too.

The outgoing plan reports a direct rollover on Form 1099-R. A receiving IRA generally reports the rollover contribution on Form 5498. Those forms describe different sides of the same movement; their existence does not mean a tax-free rollover has become taxable.

Reconcile the gross distribution, any amount retained personally, any withholding and the amount accepted as a rollover. If they do not match the intended transaction, resolve the difference before using the forms to prepare the return.

Receiving the money is also not the same as choosing investments. The account’s cash position and investment instructions are a separate check after the rollover is recorded.

About this guide

Written by the Diversify Guy editorial desk. Diversify Guy is a pen name. It is the byline of our editorial team, not a single individual. We do not publish personal trading records or claim to be your adviser. We tell you where every figure came from so you can check it yourself. How we work and how we get paid.

This guide explains federal tax rules, not state tax rules. It is not personalized tax or investment advice.

Sources and check dates

Sources fetched and checked November 3, 2026. The fact sheet records the exact passages and computations supporting this guide.

• IRS, Rollovers of after-tax contributions, checked November 3, 2026.
• IRS, Rollover chart, checked November 3, 2026.
• IRS, Comparison of governmental and tax-exempt 457(b) plans, checked November 3, 2026.
• IRS, IRA contribution limits, checked November 3, 2026.
• Treasury regulation 1.401(a)(31)-1, direct rollovers, checked November 3, 2026.
• IRS, Exceptions to tax on early distributions, checked November 3, 2026.
• SEC Investor.gov, How fees and expenses affect your investment portfolio, checked November 3, 2026.
• IRS, August 12, 2026 rollover sample-form announcement, checked November 3, 2026.
• IRS, Instructions for Forms 1099-R and 5498 (2026), checked November 3, 2026.
• IRS, Retirement plans FAQs regarding IRAs, checked November 3, 2026.
• IRS, Termination of employment (options only; obsolete cash-out amount rejected), checked November 3, 2026.
• IRS, Retirement plans FAQs regarding loans, checked November 3, 2026.
• IRS Notice 2018-74, rollover explanations (NUA passage only), checked November 3, 2026.
• IRS Publication 575, pensions and annuities, checked November 3, 2026.
• IRS Publication 590-A, contributions and rollovers, checked November 3, 2026.
• IRS Publication 590-B, IRA distributions, checked November 3, 2026.
• IRS, Required minimum distributions, checked November 3, 2026.
• IRS, Rollovers of retirement plan and IRA distributions, checked November 3, 2026.
• IRS, FAQs on designated Roth accounts, checked November 3, 2026.
• IRS, SIMPLE IRA withdrawal and transfer rules (transfer restriction only), checked November 3, 2026.