Common questions
Short answers about rollovers, taxes, and paperwork. This page is general information only, not financial, investment, or legal advice.
The balance usually stays in your former employer's plan until you decide. Most plans let you leave it, roll it into an IRA, move it to a new employer plan that accepts rollovers, or cash it out. Each path changes your fees, your investment menu, and your tax picture.
A direct rollover between retirement accounts is not taxable when the money moves trustee to trustee. If a check is made out to you instead, the plan generally withholds 20% for federal income tax, and you have 60 days to deposit the full original amount, including the withheld portion, to avoid tax and penalties.
It depends on what you value. An IRA often gives you a wider investment menu, while a new employer plan may allow loans and keeps your savings in one place, which simplifies record keeping. Compare fees, fund choices, and how each account handles creditor protection before you move anything.
Cashing out is typically the most expensive option. The amount is generally taxed as ordinary income, and if you are under 59 and a half you may owe an additional 10% early distribution penalty. You also give up every year of growth that balance would have earned.
Your own contributions are always yours. Employer contributions follow a vesting schedule set by the plan, often over three to six years, and anything unvested is forfeited when you leave. Confirm your vesting date before you pick a final day at work.
Many plans require repayment shortly after you separate from service. If you miss that window, the outstanding balance is usually treated as a distribution, which can trigger income tax and a possible early withdrawal penalty. Read the loan terms before your last day.
Still deciding? Compare plan by plan on the rollover options page, work through the job-change checklist, or read the tax questions further down this FAQ.
Most of what people worry about at a job change comes down to two things: how the transfer is reported, and what it costs to keep the account running. Direct transfers between like accounts are not taxable. Payments made to you personally usually are. Compare total annual cost, not a single fee line.
Informational only. This is not financial, investment, or legal advice. Confirm details with your plan administrator and a qualified professional before you move money.
A direct rollover sends the balance from trustee to trustee, so nothing is reported as income and no withholding applies. Taxes appear when the check is made payable to you instead. A 60-day indirect rollover can still be tax-free if you replace the withheld amount from other savings in time.
The full amount becomes ordinary income for the year you receive it, and if you are under 59½ a 10% early distribution penalty generally applies as well. Twenty percent is typically withheld up front, which often is not enough to cover the final bill. You also give up the tax-deferred growth on that balance.
Add up fund expense ratios, any flat recordkeeping or administrative charge, and trading or advisory costs. A plan with cheap funds can still carry a yearly per-account fee, and an IRA with no account fee may charge per trade. Compare the total annual cost on your actual balance. Our tax notes walk through the same comparison.
Yes, but the destination matters. Roth 401(k) money normally goes to a Roth IRA to keep its tax treatment intact, while after-tax contributions are often split between a Roth IRA and a traditional IRA. Ask your administrator how each piece will be coded, since a mistaken split can create a taxable event.
If the outstanding balance is not repaid on the plan's repayment schedule, it is usually treated as a distribution. That means income tax on the amount, and possibly the 10% penalty if you are under 59½. Repaying before the plan's deadline is generally the cheapest route, so confirm that date in writing.
When a question goes past general guidance, we point people at the source. These are the government pages we return to most often when reviewing retirement accounts during a career transition. All of them are free to read, and none of them sell a product.
The 60-day window, direct versus indirect transfers, and when a distribution becomes taxable.
A one-page table showing which account types can roll into which, at a glance.
Contribution limits, required distributions, and what happens to an IRA you already hold.
Plain-language breakdown of the fees taken from a workplace account, and where to find them.
How a distribution gets reported to you and to the IRS, and which boxes matter at tax time.
Check your earnings record, which sits underneath any long-range retirement projection.
Answers are only half the job. The checklist turns them into a short sequence of actions you can finish in one sitting, so nothing slips between your last day and your first contribution in the new plan.
This page is for informational purposes only and is not financial, investment, or legal advice. A qualified professional can review your situation.