How to roll over a 401(k) to an IRA

What is a 401k rollover?

A 401(k) rollover is the process of moving eligible funds from a 401(k) or similar employer-sponsored retirement plan into another qualified retirement account. When handled correctly, the rollover is generally not treated as taxable income.

A rollover IRA is an IRA that receives eligible funds from an employer-sponsored retirement plan. Depending on your situation and what the IRA provider allows, that may be an existing IRA with the same tax treatment or a new account opened specifically for the rollover. Some financial institutions use "rollover IRA" to refer specifically to accounts opened for this purpose.

This article focuses on the rollover process itself. If you are still deciding whether a rollover is the right move, learn more about your options when you leave a job or the pros and cons of rolling over a 401(k) to an IRA.

Before your start a 401(k) rollover

Before requesting a rollover, take time to review your current 401(k) and understand how your plan handles the process.

• Review your 401(k) account. Check the type of assets held in the account and whether the funds you want to move are eligible for rollover. Gather your account number and plan administrator contact information.
• Review your plan's rollover process. Contact your plan administrator or check your plan documents to learn how rollover requests are handled and whether the plan has specific requirements.
• Ask what you'll need to submit. Find out whether the plan requires forms, signatures or other documentation to process a rollover request.
• Ask how rollover funds can be sent. The plan may send funds electronically or issue a check. Knowing the available methods can help you prepare for the next steps.

How to roll over a 401(k) to an IRA

The exact process can vary by 401(k) plan and IRA provider, but a rollover generally follows these steps.

1. Choose and open the receiving IRA

If you do not already have an IRA set up to receive the funds, open one before initiating the rollover. You will typically need a government-issued ID, your Social Security number and beneficiary information. Confirm with the IRA provider that the account can accept a rollover from an employer plan and ask how an incoming check should be made payable if one is issued. The IRA provider will typically let you know when the account is approved and ready to receive funds.

2. Contact your 401(k) plan administrator

Once your IRA is open and approved, reach out to the plan administrator or your human resources department. Ask how to request a rollover, what forms are required and how long the process typically takes. Ask specifically whether the rollover will be completed electronically or by check.

3. Complete the rollover request

Your IRA provider will typically guide you through the rollover request process. Follow the plan administrator's instructions, provide the required IRA information and review the details before submitting. Keep copies of any forms, confirmations or other documentation related to the request. A financial professional can help you coordinate this step if needed.

4. Follow the rollover instructions

If the rollover is electronic, funds may move directly to the IRA provider. If a check is issued, it will typically be made payable to the IRA provider rather than to you. Follow the IRA provider's instructions for forwarding the check to them. The direct and indirect rollover section below explains both methods and the timing and withholding considerations that may apply.

5. Confirm the funds arrive

After the rollover is initiated, follow up with both the plan administrator and the IRA provider to confirm the funds left the old account and arrived in the new one. Keep a record of confirmation dates and any reference numbers.

What to check after your rollover

Once the rollover is complete, a few follow-up steps can help confirm everything processed correctly.

• Verify the intended amount rolled over. Review your final 401(k) statement and the receiving IRA to confirm the intended amount arrived. Contact the plan administrator or IRA provider if there is a discrepancy.
• Confirm the money is invested. Rollover funds may arrive in the IRA as cash rather than being invested automatically. Review how the money is held and take action if needed based on your goals and risk tolerance.
• Review beneficiary information. If you opened a new IRA for the rollover, confirm that your beneficiary information is current.
• Keep your rollover records. Save any forms, confirmation statements and related correspondence. The 401(k) plan administrator will issue a Form 1099-R for the tax year the rollover occurred, which you will need when filing your return.
• Check the remaining 401(k) balance. Review the old account after the rollover and contact the plan administrator if the balance is not what you expected.

Direct and indirect 401(k) rollovers

When rolling over a 401(k), how the funds are sent can affect the steps you need to take and the tax withholding that may apply.

• Direct rollover: The plan sends eligible funds directly to the IRA provider or issues a check payable to the IRA provider on your behalf. You do not take possession of the money, and federal income tax is not withheld from a direct rollover.
  • If pre-tax 401(k) funds are rolled into a Roth IRA, the converted amount may be included in your taxable income for that year. No withholding occurs at the time of the rollover, but any taxes owed would need to be paid from other funds.
• Indirect rollover: The plan pays the funds to you first and is generally required to withhold 20% for federal income taxes at the time of payment. To roll over the full amount, you would need to make up the withheld 20% from other funds. Under current IRS rules, you generally have 60 days from the date of the distribution to complete the rollover.

Indirect rollovers involve additional timing and withholding considerations. Review the current IRS guidance on rollovers of retirement plan and IRA distributions before proceeding if the distribution will be paid to you.

Frequently asked questions about 401(k) rollovers

Can I roll over my 401(k) to an IRA?

In most cases, yes. The funds in a 401(k) can generally be rolled over to an IRA, though eligibility depends on your plan's rules and the type of funds involved. Some amounts, such as required minimum distributions, cannot be rolled over. Confirm with your plan administrator that what you want to move is eligible before starting the process.

How long does it take to roll over a 401(k)?

Processing times for a 401(k) rollover can vary based on the plan administrator, IRA provider and whether funds are moved electronically or by check. Ask both the 401(k) plan administrator and your IRA provider what processing time to expect and monitor your accounts until the rollover is complete.

Keep in mind that processing time is different from the IRS 60-day rollover rule. That deadline generally applies when an eligible distribution is paid to you and you plan to deposit it into another eligible retirement account.

Can you roll over a 401(k) to a Roth IRA?

In many cases, eligible 401(k) funds can be rolled over to a Roth IRA. However, any previously untaxed amounts moved into a Roth IRA are generally included in your taxable income for the year of the rollover. Review current IRS guidance before completing this type of rollover, since the tax treatment depends on the type of funds being moved.

Can I contribute to a rollover IRA?

In most cases, yes. A rollover IRA can generally accept regular IRA contributions if you meet the applicable eligibility and income requirements. Rollover funds themselves do not count toward the annual IRA contribution limit. Contribution rules are subject to IRS limits that can change from year to year.

More help with your retirement account options

Where you go from here depends on your situation. These resources may help.

• Still deciding what to do with an old 401(k)? Your 401(k) Options When You Leave a Job covers leaving funds in the old plan, moving to a new employer plan, rolling into an IRA or cashing out.
• Comparing the benefits and drawbacks of a rollover? Pros and Cons of Rolling Over a 401(k) to an IRA goes deeper on investment choices, fees, creditor protections and other considerations.
• Thinking about a loan or withdrawal instead? Cashing out your 401(k) or getting a loan explains the differences and what each option may mean for your taxes.
• Learning more about retirement accounts? Explore IRAs with State Farm or contact a State Farm agent to help you navigate your options.