Rolling a 401(k) Into an IRA FAQs

Some reasons to roll over your 401(k) include:

• Lower Fees: IRAs often have lower administrative costs than 401(k)s.
• More Investment Options: IRAs typically offer a wider range of investments, such as individual stocks, bonds, and ETFs.
• Consolidation: Rolling over helps consolidate retirement accounts for easier management.
• No Employer Ties: Your IRA isn’t linked to your former employer, giving you full control.

Potential drawbacks include:

• Loss of Employer Match: IRAs don’t include contributions from employers.
• Loss of Certain 401(k) Protections: 401(k)s may have better legal protection from creditors in some states.
• Required Minimum Distributions (RMDs): If you roll over into a traditional IRA, you’ll need to start taking RMDs at age 73, unlike Roth 401(k)s, which don’t require RMDs if left in the employer’s plan.

• Traditional IRA: Maintains the tax-deferred status of your funds.
• Roth IRA: Requires paying taxes on the rolled-over amount upfront but allows for tax-free withdrawals in retirement.

1. Open an IRA Account: Choose a provider that suits your investment needs.
2. Request a Direct Rollover: Ask your 401(k) provider to transfer funds directly to your new IRA. This avoids tax withholding.
3. Select Your Investments: Decide how to invest the funds in your IRA.

• Direct Rollover: Funds are transferred directly from your 401(k) provider to your IRA provider. This avoids tax penalties.
• Indirect Rollover: Funds are sent to you first, and you must deposit them into an IRA within 60 days to avoid taxes and penalties. The provider will withhold 20% for taxes, which you must make up when depositing.

• Traditional IRA: No taxes if rolled over directly, as both accounts are tax-deferred.
• Roth IRA: Taxes are due on the rolled-over amount because Roth IRAs are funded with after-tax money.

Yes, you can roll your 401(k) funds into an existing IRA. Make sure the IRA is compatible with your tax goals (traditional or Roth).

You can roll over a Roth 401(k) into a Roth IRA. No taxes are due during the rollover, as both accounts involve after-tax contributions. However, the 5-year rule for Roth IRAs may apply to earnings.

Most plans only allow rollovers after you leave the company. However, some 401(k) plans offer in-service rollovers, allowing transfers to an IRA while still working.