401(k) rollover to IRA

1. Decide Whether to Roll Over

• Compare your current 401(k) fees and investment options with available IRA options
• Consider keeping the 401(k) if it has institutional-class low-cost funds
• Evaluate whether you need creditor protection (401(k) plans have stronger federal protections)
• Check if you have company stock with net unrealized appreciation (NUA) — special tax rules may apply

2. Choose the Right IRA Type

• Pre-tax 401(k) contributions roll into a Traditional IRA or Rollover IRA
• Roth 401(k) contributions roll into a Roth IRA
• Mixed accounts require two separate IRAs (one Traditional, one Roth)
• Consider whether a Roth conversion makes sense at this point

3. Open the IRA Account

• Choose a brokerage (Fidelity, Vanguard, Schwab, etc.)
• Open the appropriate IRA type (Traditional/Rollover IRA or Roth IRA)
• Complete the application with personal information and beneficiary designations
• Obtain the account number and any required Letter of Acceptance

4. Contact Your 401(k) Plan Administrator

• Call the number on your 401(k) statement or log into the plan portal
• Request a direct rollover (trustee-to-trustee transfer)
• Provide the new IRA account details and any required forms
• Ask about processing time and any fees

5. Complete Required Paperwork

• Fill out the plan's distribution/rollover request form
• Specify "direct rollover" to avoid the mandatory 20% tax withholding
• Provide the receiving institution's name, address, and your IRA account number
• Some plans require a Letter of Acceptance from the receiving institution

6. Monitor the Transfer

• Track the processing timeline (typically 2-4 weeks)
• Confirm funds arrive in your IRA — check may be mailed to you payable to the new custodian
• If you receive a check made out to you, you have 60 days to deposit it into the IRA

7. Invest the Funds

• Once funds arrive, they may sit in a default money market or settlement fund
• Select your desired investments (index funds, ETFs, bonds, etc.)
• Set up automatic rebalancing if available
• Consolidate with existing IRA assets if applicable

Common Mistakes

• Choosing an indirect rollover
• Forgetting to invest after rollover
• Not considering Roth conversion
• Cashing out instead of rolling over
• Rolling over employer stock without evaluating NUA

Pro Tips

• Always request a direct rollover to avoid the mandatory 20% withholding on in...
• Keep rollover IRA funds separate from contributory IRA if you may ever want t...
• Use the rollover as an opportunity to simplify: consolidate old 401(k) accoun...
• Compare expense ratios — moving from a 401(k) with 0.5-1% fees to index funds...
• If you are age 55-59.5 and left your employer, you can take penalty-free with...

Sources

• Rollovers of Retirement Plan and IRA Distributions - IRS
• 401(k) Rollover to IRA Steps - Fidelity
• 401(k) to IRA Rollover Rules - Vanguard
• How to Roll Over a 401(k) - Empower
• Topic No. 413 Rollovers - IRS

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