What to Know About IRA Rollovers

June 19, 2024

Share this article

What we'll cover:

If you’re rolling over from a 401(k) plan, you can ask your plan administrator to make the payment directly to another workplace retirement plan or to an IRA.
If you have IRAs at different financial institutions and wish to consolidate them under one provider, you could initiate an IRA-to-IRA transfer.
When it comes to choosing an IRA provider for your rollover, consider what features and services are important to you and how much you’re willing to pay for them.

Individual Retirement Accounts (IRAs) have limits on how much you can contribute each year.

But there are no limits on how much you can move into an IRA by rolling over dollars from a workplace retirement plan at a former employer (such as a 401(k) plan) or from an IRA at another financial institution (an IRA-to-IRA transfer).

However, other limitations may apply depending on how the retirement funds are rolled over. If you’re considering a rollover, here are some important basics to keep in mind.

401(k) to IRA

When you leave a company, you usually have a few options for what to do with the money that’s in your 401(k) plan. These may include:

Keeping your money in the plan (if your former employer allows it).
Rolling the money to an IRA.
Rolling the money to a new employer’s 401(k) plan (if permitted).
Withdrawing the money (which may be subject to income tax and a 10% early withdrawal penalty unless you’re eligible for an exception; visit the IRS or consult a tax advisor for more information).

Keep in mind that each option may have different benefits, trade-offs, and tax implications for your retirement savings. It’s a good idea to consult your financial or tax advisor if you have any questions before initiating a rollover. They can help you weigh the tax and investment implications, as well as other considerations, of each option.

When it comes to rolling your 401(k) funds from a former employer’s plan to an IRA, generally speaking, no tax is due if you roll over money directly from:

a 401(k) funded with pre-tax contributions to a Traditional IRA, or
a Roth 401(k) funded with after-tax contributions to a Roth IRA.

The IRS provides a chart with more information on allowable rollovers here.

Be aware that how you choose to roll over your funds matters. You can typically choose to do a direct or indirect rollover.

Direct rollover. If you’re rolling over from a 401(k) plan, you can ask your plan administrator to make the payment directly to another workplace retirement plan or to an IRA. Contact your plan administrator for instructions. Generally, no taxes will be withheld from your transfer amount.
Indirect rollover (also known as a 60-day rollover). If you request a distribution from a 401(k) to be paid to you (instead of rolling it over directly to another retirement account), it is typically subject to a 20% mandatory withholding tax. This is even if you intend to roll the money to another retirement account at a later date.
An indirect rollover is typically not recommended because if you don’t put the money (the full amount of the distribution) back into another retirement account within 60 days, you may have to pay income taxes on the distribution and a 10% early withdrawal penalty unless you’re eligible for an exception. (See also: IRS waivers on the 60-day rule.)

This is one reason why it’s often preferable to request a direct rollover when moving money from a 401(k) to another retirement account.

Good to know: If you have a number of old 401(k) accounts from previous jobs, consolidating them under one account (like an IRA or another 401(k) plan) might make it easier to monitor your funds and invest the money in line with your investing goals. But before moving your money, it is important to review and compare important account details like fees and available investment options. Be aware that some account providers might charge higher fees or offer fewer investment options.

IRA to IRA

If you have IRAs at different financial institutions and wish to consolidate them under one provider, you could initiate an IRA-to-IRA transfer.

There are two main ways to do this.

Trustee-to-trustee transfer. This is where you ask your IRA provider to transfer your retirement funds directly to another IRA (an account that’s at a different financial institution). Generally, no taxes will be withheld from your transfer amount.
Indirect rollover (or 60-day rollover). Remember when we talked about indirect rollovers in the last section? The same general rules apply here as well. If you request a distribution be paid to you before depositing those dollars into a new IRA, you usually have to pay a withholding tax, which is typically 10% for an IRA distribution (unless you choose to have a different amount withheld).
You also have to pay attention to the 60-day rule. Generally, you must deposit the money (the full amount of the distribution) into another IRA within 60 days. Otherwise, the distribution may be treated as an early withdrawal, which means you may have to pay taxes and a penalty.

IRA one-rollover-per-year rule from the IRS: Keep in mind that you generally cannot make more than one rollover from the same IRA within a one-year period. You also cannot make a rollover during this one-year period from the IRA to which the distribution was rolled over.

However, this rule does not apply to:

Trustee-to-trustee transfers to another IRA
Rollovers from Traditional IRAs to Roth IRAs (conversions)
IRA-to-plan rollovers
Plan-to-IRA rollovers
Plan-to-plan rollovers

Visit the IRS for more information. It’s a good idea to consult with a tax professional if you have questions regarding your specific tax situation.

Good to know: If you’re thinking about moving money from one IRA provider to another, you may want to do some research to compare the selection of available investments, fees, and other services offered. Remember, it’s impossible to know how different investments will perform over time. When it comes to choosing an IRA provider, consider what features and services are important to you and how much you’re willing to pay for them. All other things being equal, lower investment costs typically result in a larger balance over time.

This article is for informational purposes only and shall not constitute an offer, solicitation, or recommendation. This article was prepared by and approved by Marcus by Goldman Sachs® but is not a description of any of the products or services offered by and does not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, or any of their affiliates, subsidiaries or divisions. Goldman Sachs Bank USA is not providing any financial, economic, legal, accounting, tax or other recommendation in this article and it is not a substitute for individualized professional advice. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA, or any of its affiliates, none of which are a fiduciary with respect to any person or plan by reason of providing the material or content herein. Neither Goldman Sachs Bank USA, nor any of its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in this document and any liability therefore is expressly disclaimed.