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How to roll over a 401(k) (IRS rules, plain English)

Leaving a job? You can usually move your old 401(k) into an IRA or your new employer's plan without paying tax, if you do it the right way. The safest way is a direct rollover: the old plan sends the money straight to the new account. Here are the IRS rules, step by step.

Your 4 choices (plain English)

Direct rollover to an IRA: the plan pays the IRA directly. No tax withheld.
Direct rollover to your new job's plan, if it accepts rollovers.
Leave it where it is, if the plan allows (it may cash out balances of $1,000 or less without asking).
Cash it out: taxed as income, 20% withheld up front, and usually a 10% extra tax if you're under 59½.

IRS rules that trip people up

60-day deadline: if the money is paid to you, you have 60 days from the day you receive it to deposit it in another plan or IRA.
20% withholding: a plan distribution paid to you has 20% withheld, even if you plan to roll it over. To roll over the full amount, you must make up that 20% from other money within 60 days; otherwise the shortfall is taxed.
10% additional tax: money you don't roll over is generally taxable and may face the 10% additional tax on early distributions unless an exception applies.
Small balances: if your account is $1,000 or less, the plan may pay it to you (minus, in most cases, 20% withholding) without your consent.
One-per-year rule: you generally can't do more than one IRA-to-IRA rollover from the same IRA in 12 months. Direct transfers don't count.

Source: IRS: Rollovers of retirement plan and IRA distributions (checked 2026-10-12). Roth 401(k) money should go to a Roth IRA or Roth plan account; ask both providers to confirm before moving.

Step by step

Open the IRA (or confirm your new plan accepts rollovers).
Ask your old plan for a direct rollover and give it the new account details.
If they mail a check, make sure it's payable to the new provider "for the benefit of" you.
Check that the money arrives and gets invested; it may land in cash first.

Next step: Pick an IRA provider · Or let a robo-advisor invest it · See what fees cost you

FAQ

How long do I have to roll over a 401(k)?

60 days from the day you receive the distribution, per the IRS. A direct rollover avoids this deadline because the money never comes to you.

Why was 20% taken out of my 401(k) check?

The IRS requires 20% withholding on plan distributions paid to you, even if you roll it over. Replace it from other funds within 60 days to roll over the full amount.

Is a 401(k) rollover taxable?

Not if done as a direct rollover or completed within 60 days into a similar account. Amounts not rolled over are generally taxable and may face a 10% additional tax if you're under 59½.

Estimates, not financial advice. Taxes, insurance, PMI and fees vary by lender, county and city; confirm with your lender, dealer and state agency before acting.