How to Roll Over a 401(k) to an IRA: Step by Step

A 401(k) rollover moves retirement money from an old employer's plan into an IRA or a new 401(k). Done the right way (called a direct rollover), it costs you nothing in tax. The money keeps its tax break, you usually get more choices for what to invest in, and you owe the IRS nothing at the moment of the move.

When you leave a job, your 401(k) (opens in new tab) stays with your old plan until you do something about it. You have four choices: leave it there, roll it into your new employer's plan, roll it into an IRA, or cash it out. Leaving it where it is works fine if the investments are decent and the fees aren't awful. Rolling it into a new employer's plan keeps things in one place, though you're still stuck with whatever that plan offers. Cashing out means paying income tax on the full amount, plus a 10% penalty if you're under 59.5. It's almost always the most expensive choice, and once you do it, the money loses its special tax treatment for good. People pick it because it's the least paperwork. That's a mistake.

Rolling a traditional 401(k) to a traditional IRA is a tax-free transfer. No tax owed, no penalty. Once it's in the IRA, you can invest in individual stocks, ETFs, bonds, mutual funds, whatever your IRA custodian supports. That's the main reason people move old 401(k)s to IRAs: more control, more options.

For background on how IRAs compare to 401(k)s and other account types, see the retirement accounts explainer.

Step 1: Decide what kind of IRA the money is going into. Moving traditional 401(k) money into a traditional IRA costs you nothing in tax. Moving it into a Roth IRA is a conversion, and you'll owe tax on it that year (covered above). Moving Roth 401(k) money into a Roth IRA also costs nothing in tax. Decide this before you fill out any paperwork. It changes everything that comes next.

Step 2: Open the IRA before you start the rollover. The account has to exist before the money shows up. If an investment advisor is going to manage it, sign their advisory agreement and open the account first. Narstar manages Rollover IRAs held at Interactive Brokers. The standard minimum is $3,000 per Model Portfolio in a non-retirement account, and $3,000 per account in a Traditional, Roth, or SEP IRA, where one account can hold more than one model portfolio. A new client may open one $100 Starter Account, which must reach $3,000 by the last day of the sixth calendar month after opening. SIMPLE IRA participant accounts have a $0 minimum and are not eligible for the Starter Account. Thinking about going that route? See how it works below before you start the paperwork. Still deciding on an advisor? Know the difference between fee-only and fee-based advisors before you sign anything.

Step 3: Contact your old plan administrator and request a direct rollover. They'll ask for your new custodian's name, your account number, and often a letter saying the new IRA will accept the money. Get that letter from your IRA custodian first so it's ready to go. Some plans let you do this online. Others need a phone call or paperwork by mail. Ask which one on your first call, so you're not stuck waiting on paper.

Step 4: Check the payable-to line on the check. It should read: "[Custodian Name] FBO [Your Name], IRA." FBO means "for the benefit of." If the check is made out to you personally instead, that turns it into an indirect rollover: 20% gets withheld, and you're on a 60-day deadline. That's exactly what you want to avoid.

Step 5: Confirm the money arrived intact. Once the funds post, check the amount against your final 401(k) statement. Plans sometimes send a second, smaller check weeks later for trailing dividends or last contributions. That's still rollover money too, deposit it into the IRA, don't cash it.

Step 6: Invest the cash. Once the money arrives, it sits uninvested until you do something with it. The IRA custodian won't invest it automatically. If you're in a managed account, the adviser handles it once funds clear. If you're managing it yourself, you decide. Most people skip this step for weeks or months. That's a mistake.

A direct rollover sends money straight from your old 401(k) to your IRA custodian. The check is payable to the custodian for the benefit of your account, not to you personally. You never touch the money, nothing is withheld, no 60-day clock starts. This is the method to use.

An indirect rollover is where you can get into trouble. The distribution goes to you first, and the plan is required by law to withhold 20% for federal income taxes. So you receive 80% of the balance. From there you have 60 days to deposit the full original amount (opens in new tab) into an IRA, including the withheld 20%, which you have to cover out of pocket. Deposit only the 80% you received and that missing 20% becomes a taxable distribution, subject to the 10% early withdrawal penalty if you're under 59.5. You'll eventually get the withheld amount back as a tax refund, but the penalty doesn't go away.

The indirect rollover is legal. But for a standard 401(k)-to-IRA transfer, there's almost no reason to use it. Request a direct rollover. If the plan administrator seems confused, ask them to make the check payable to your IRA custodian rather than to you. That phrasing usually settles it.

A traditional 401(k) holds pre-tax money. A Roth IRA holds post-tax money. When you roll the first into the second, you're converting pre-tax dollars to post-tax dollars, and the whole converted amount becomes taxable income that year. No 10% early withdrawal penalty on the conversion itself. But you will owe income tax on whatever you convert.

Sometimes it makes sense. It depends on your tax bracket now versus what you expect in retirement, how big the account is, and a few other things that get complicated fast. Converting a large balance in a high-income year can push you into an even higher tax bracket. This isn't a decision to make on the back of a napkin. The IRS publishes the full rules in Publication 590-A (opens in new tab), but most conversions are worth having a CPA check the numbers on first.

If you have a Roth 401(k) (contributions already after-tax), rolling it to a Roth IRA is a tax-free transfer, same as traditional-to-traditional. Direct rollover is still the right method.

When you leave an employer, the money in the old plan can go four places. Compare all four before you move anything.

• Leave it in the old plan. Costs nothing to do. Some large employer plans get lower prices than you'd pay in an IRA, and 401(k) money is harder for creditors to reach than IRA money in most states, thanks to a federal law called ERISA. The trade-off is a fixed list of investments and, often, a plan administrator you can't easily reach.
• Move it into a new employer's plan. Available if the new plan accepts incoming rollovers. Keeps that same creditor protection and lower pricing, and puts your retirement money in one place. The trade-off is the same fixed investment list, plus a waiting period at some employers.
• Roll it to an IRA you manage yourself. Opens up individual stocks, ETFs, bonds, and cash. You pay no advisory fee. The trade-off is that every decision, and every mistake, is yours.
• Roll it to an IRA managed by an adviser. Same investment flexibility, with someone else responsible for the ongoing decisions. You pay an advisory fee on top of whatever the custodian charges. Narstar is one option here, and we are paid when you choose it. See the conflict disclosure below.

Compare the costs and fees of your current account against the one you're considering, what you can invest in with each, whether you can take money out early without a penalty, how required minimum distributions (the withdrawals you're eventually forced to take later in life) work for each, creditor protection, and any company stock you hold. Those are the same things we're required to write down before recommending a rollover to a client.

A few situations worth pausing on before rolling over at all:

• You hold company stock in the plan. A tax rule called net unrealized appreciation (NUA) can sometimes make it cheaper, tax-wise, to move company stock that's grown in value into a regular taxable account instead of rolling it into an IRA. Rolling it over closes off that option for good. Talk to a CPA first if you have company stock in the plan.
• You plan to retire between 55 and 59.5. The Rule of 55 lets you take penalty-free distributions from a 401(k) if you leave the job in or after the calendar year you turn 55. That rule doesn't apply to IRAs. If you roll the money over before reaching 59.5, you lose access to it without penalty until then.
• You're starting a new job soon. Some employer plans accept incoming rollovers. If you expect to join a new plan shortly, it may be worth waiting to see what that plan offers before deciding.

This article covers the mechanics. For guidance on whether a rollover makes sense in your specific situation, consult a tax or financial professional.

Opening the IRA is the fast part: usually one to three business days online. The slow part is your old plan. Most administrators take five to ten business days to process the request after paperwork is complete, and some still mail a paper check, which adds another week or two. Plans that require phone calls, notarized forms, or spousal consent stretch the timeline further. None of that is in your control.

During transit, most plans liquidate your investments and send the rollover as cash. That means you're out of the market between liquidation and reinvestment. Markets can move either direction during that window. It's not a reason to skip the rollover. It is a reason to invest the cash promptly once it arrives, rather than letting it sit.

Cashing out instead of rolling over. You'll owe income tax on the full balance, plus a 10% penalty if you're under 59.5. And the money permanently loses its tax-advantaged status. People pick this option because it's the least paperwork. It's also the most expensive decision on the list.

If the check comes to you instead of the custodian, you've turned a clean direct rollover into an indirect one. That means 20% withheld immediately, a 60-day clock, and you covering that withheld amount out of pocket to complete the rollover in full. The fix costs nothing: ask for the check payable to the custodian before anything moves.

Forgetting to invest the cash. The quietest mistake on this list. The money arrives, sits in cash, and nobody notices for months. Nothing about an IRA invests itself.

If you hold employer stock in the 401(k), look at that separately before starting the rollover. A tax rule called net unrealized appreciation (NUA) can sometimes make it cheaper to move that stock into a regular taxable account instead of rolling it into the IRA. Rolling it in wipes out that option for good. This gets into tax territory, so talk to a CPA first if you have company stock in the plan.

Assuming the IRA is automatically the better deal. It often offers more investment choices. But some large 401(k) plans get lower prices than you could get in an IRA, and employer plans usually offer stronger federal protection from creditors than IRAs, where protection depends on the state. A rollover is a decision, not something to do automatically.

For years the Department of Labor tried to make one-time rollover recommendations automatically count as fiduciary advice under ERISA. The 2024 Retirement Security Rule was the latest attempt. Federal courts halted it before it took effect, and in March 2026 a federal court vacated it entirely. As of mid-2026 there's no replacement. The full story is here.

Here's what that means in practice: when a broker or insurance agent recommends rolling over your 401(k), that recommendation isn't automatically held to a fiduciary standard under federal retirement law. Brokers follow a rule called Regulation Best Interest, which is a lower bar than fiduciary duty. Insurance agents follow state insurance rules. Registered investment advisers are different: their fiduciary duty comes from a separate law, the Investment Advisers Act, and it applies no matter what the DOL does. See what fiduciary duty requires.

Before acting on anyone's rollover recommendation, ask two questions: are you a fiduciary with respect to this recommendation, and how are you paid if I follow it? The answers tell you whose interest the advice was built to serve.

If you roll a 401(k) into a Rollover IRA at Interactive Brokers, we can manage it as one or more of our three model portfolios. The account stays in your name at IBKR. We can make trades in it, but we can't pull money out or send it anywhere. Once the money is in the account and you've signed our advisory agreement, we match it to Income, Growth, and Speculative, whichever fits, based on your goals and how long you plan to invest. One retirement account can hold more than one of these portfolios. That is a real structural difference from a taxable account: there, each model portfolio needs its own account and has to meet the minimum on its own, while a single rollover IRA can hold all three side by side under one minimum and one rate. All investing carries risk, including the possible loss of principal.

Taxable accounts pay 0.60% a year for Income, 1.20% for Growth, and 1.60% for Speculative. Traditional, Roth, Rollover, SEP, and SIMPLE IRA accounts all use the uniform 1.00% annual IRA rate regardless of model portfolio mix, billed quarterly in arrears. On a $50,000 rollover IRA, that's $500 a year, charged in $125 quarterly installments. There's no setup fee and no rollover processing fee. Interactive Brokers may charge its own separate fees.

To be clear: we don't handle the rollover paperwork itself. Contacting your old plan and setting up the transfer is between you, your old plan, and IBKR. What we do is manage the portfolio once the money arrives. Haven't picked an adviser yet? The guide to finding a fee-only adviser covers what to check before you sign anything. Whoever you pick, ask how they get paid and what it takes to leave. If you want to know what the account would look like once it's set up, the contact form below is the place to start.

Our conflict of interest, stated plainly. We get paid a fee on the money we manage. If you roll retirement money into an IRA we manage, we get paid. If you leave it in your old plan, move it to a new employer's plan, or roll it into an IRA somewhere else, we don't. That's a real financial reason for us to suggest a rollover, so weigh our advice with that in mind. Before we ever recommend a rollover to a client, we write down a real comparison between your existing account and the proposed IRA. You're never required to roll over your money or to work with us. This conflict is written up in our Form ADV.

How long does a 401(k) rollover take?

Usually two to four weeks, start to finish. Opening the IRA takes one to three business days. Your old plan usually takes five to ten business days to process everything once the paperwork is done, and longer if they mail a paper check. The timeline section above breaks down where the time actually goes.

Do I pay taxes on a 401(k) rollover?

A direct rollover from a traditional 401(k) to a traditional IRA doesn't trigger any tax. Rolling a traditional 401(k) into a Roth IRA is a conversion, and the amount you convert counts as taxable income that year. An indirect rollover can cost you in taxes and penalties if you miss the 60-day deadline. Talk to a tax professional about your specific situation.

Can I roll over a 401(k) from my current employer?

Usually not while you still work there, unless your plan allows what's called an in-service distribution. Some plans allow this after age 59.5. Everything else in this article is about plans from jobs you've already left. Check your plan documents or ask the administrator directly.

What happens to my employer match?

The part that's vested (fully yours) rolls over along with everything else. Anything not yet vested goes back to the plan when you leave, based on whatever schedule your plan sets. Your final statement shows how much was vested.

Does Narstar handle the rollover paperwork?

No. That part is between you, your old plan, and IBKR. Once the money arrives, we manage the portfolio under one of our three model portfolios. The section above explains what that looks like.

Can I roll over my 401(k) into an existing IRA?

Yes. If you already have a traditional IRA, you can send the rollover straight into that account, no need to open a new one. If your existing IRA is a Roth and you're rolling over a traditional 401(k), that counts as a conversion: the full amount becomes taxable income that year, same as any other Roth conversion.

When can I roll over my 401(k) to an IRA?

After you leave that employer. Quitting, getting laid off, or retiring is what opens the door. There's no minimum age and no deadline: the money can sit in the old plan for years, and you can roll it over whenever you're ready. Still working there? Most plans won't let you roll over before age 59.5, though some do. Check your plan documents.

Can I roll over part of my 401(k) to an IRA?

Yes. You can roll over part of it and leave the rest in the plan. Not every plan administrator makes this simple, but it's allowed. The same direct rollover rules apply to whatever amount you move.