How to Rollover a 401(k) When Changing Jobs or Retiring

Changing jobs or retiring marks a significant transition in one’s career, and it often involves decisions regarding retirement savings. If you have a 401(k) plan with your current employer, it’s important to understand the options available for your retirement funds when you move on to a new job or enter retirement. One common strategy is to initiate a rollover, which allows you to transfer your 401(k) funds to another retirement account.

In this article, we’ll explore the process of rolling over a 401(k) and provide guidance to help you make informed decisions tailored to your unique situation.

Evaluate Your Options and Goals

When contemplating a 401(k) rollover, it’s essential to evaluate your options and goals. Consider the following factors:

New Employer’s Plan: If your new employer offers a retirement plan, such as a 401(k) or 403(b), you may have the option to roll over your existing 401(k) into the new plan. Evaluate the features, investment options, and employer contributions of the new plan to determine if it aligns with your retirement goals.

Individual Retirement Account (IRA): Rolling over your 401(k) into an IRA provides more control and flexibility over your investments. IRAs offer a wider range of investment options and often have lower fees compared to employer-sponsored plans. Evaluate whether an IRA suits your investment preferences and long-term goals.

Financial Needs: Assess your current financial needs and retirement goals. Consider factors such as investment diversification, access to funds, withdrawal options, and estate planning. This evaluation will help determine which rollover option best aligns with your specific circumstances.

Understand the Rollover Process

Once you have decided on the rollover option that suits your goals, it’s important to understand the rollover process. Here’s a step-by-step guide:

Contact Your Current 401(k) Provider: Reach out to your current 401(k) provider to understand their specific rollover procedures. They will provide you with the necessary forms and guidance on how to initiate the rollover.

Choose the Rollover Destination: Indicate whether you want to roll over your funds into an IRA or another employer-sponsored retirement plan. Provide the necessary information about the receiving institution, such as the name, address, and account number.

Decide Between Direct or Indirect Rollover: You have two options for transferring your funds: a direct rollover or an indirect rollover. With a direct rollover, the funds are transferred directly from your 401(k) provider to the new account without passing through your hands. An indirect rollover involves receiving the funds as a distribution and then depositing them into the new account within 60 days. It’s important to note that with an indirect rollover, 20% of the distribution may be withheld for taxes.

Complete the Necessary Paperwork: Fill out the required paperwork provided by your 401(k) provider. This may include rollover forms, distribution forms, and account setup documents for the receiving institution. Ensure that all information is accurate and complete to avoid delays or complications.

Monitor the Rollover Process: Stay informed about the progress of your rollover. Contact both the current 401(k) provider and the receiving institution to track the transfer and ensure that all necessary steps are completed smoothly.

Consider Tax Implications

Understanding the tax implications of a 401(k) rollover is crucial to avoid unexpected tax consequences. Consider the following:

Direct Rollover and Tax-Deferred Status: A direct rollover from your 401(k) to an IRA or another qualified retirement account preserves the tax-deferred status of the funds. No taxes are due at the time of the rollover.

Indirect Rollover and Withholding: If you choose an indirect rollover, 20% of the distribution may be withheld for taxes. To avoid tax consequences and potential penalties, you must deposit the full amount of the distribution, including the withheld portion, into the new account within 60 days. Failure to do so may result in taxes and early withdrawal penalties.

Roth 401(k) to Roth IRA: If you have a Roth 401(k) and want to roll it over into a Roth IRA, the funds will be subject to income tax. However, once the funds are in the Roth IRA, future qualified withdrawals will be tax-free.

Consult with a tax professional or financial advisor to understand the specific tax implications based on your unique situation.

Seek Professional Guidance

Navigating the rollover process can be complex, and seeking professional guidance is advisable. A financial advisor or retirement specialist can help assess your goals, evaluate the available options, and provide personalized advice. They can also assist with the paperwork, tax considerations, and ensure compliance with the rollover process.

Regularly Review and Adjust

After completing the rollover, continue to monitor and review your retirement accounts regularly. Adjust your investment allocation as needed, based on your risk tolerance, time horizon, and retirement goals. Regular reviews will help ensure that your retirement savings remain on track and aligned with your evolving objectives.


Rolling over a 401(k) when changing jobs or retiring is a crucial step in managing your retirement savings effectively. Evaluating your options, understanding the rollover process, considering tax implications, and seeking professional guidance will help you make informed decisions. By taking these steps, you can ensure that your retirement funds are transferred smoothly and continue to grow in a manner that aligns with your long-term goals and aspirations.