A 401(k) rollover transfers retirement funds from your 401(k) to another tax-advantaged retirement account. You have 60 days to complete the rollover after receiving funds, though a direct rollover (where money moves straight between accounts) is typically recommended.

Four Main 401(k) Rollover Options:

1. Roll into an IRA

• More investment choices
• Potentially lower fees
• Three types: Traditional to Traditional (tax-deferred), Traditional to Roth (taxable), or Roth to Roth (tax-free)

2. Transfer to New Employer's 401(k)

• Keeps retirement funds consolidated
• No tax penalties for direct transfers
• Contact previous plan administrator to initiate

3. Keep with Former Employer

• Consider if plan has good investment options and reasonable fees
• Can't make new contributions
• Account may be forcibly moved if balance is under $5,000

4. Cash Out (Least Recommended)

• 20% tax withholding
• Possible 10% early withdrawal penalty
• Loses tax-advantaged growth potential

Direct Rollover Benefits:

• Avoids temporary tax withholding
• Eliminates risk of missing 60-day deadline
• Simplifies the transfer process

IRA Rollover Advantages:

• Wider investment selection
• Often lower fees
• Continued tax-deferred growth
• Access to robo-advisors

Potential Drawbacks:

• Limited creditor protection compared to 401(k)s
• No loan options
• Earlier required minimum distributions
• Cannot delay distributions while working (unlike 401(k)s)
• Special considerations for company stock

Important Notes:

• No limits on rollover amounts
• Can contribute to rollover IRAs within annual limits
• Multiple rollover IRAs permitted
• Consider keeping accounts consolidated for easier management

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