Rollover

How it works

The simplest route is a direct rollover: your old plan pays the money straight to the new plan or IRA, and no tax is withheld. The plan may mail you a check, but it is made out to the new account rather than to you. Between two IRAs, the equivalent move is a trustee-to-trustee transfer, in which one financial institution sends the money directly to another.

In an indirect rollover, the money is paid to you and you generally have 60 days to deposit it into another plan or IRA. A retirement plan must withhold 20% of a distribution paid to you, and an IRA withholds 10% unless you choose otherwise. To roll over the full amount, you have to replace the withheld money from other funds. Any amount not rolled over is generally taxable, and a 10% additional tax may also apply unless an exception does.

A few more limits apply. You can make only one IRA-to-IRA rollover of the indirect kind in any 12-month period, though direct transfers and rollovers from employer plans don’t count toward it. Some payments can’t be rolled over, including required minimum distributions and hardship distributions, and a new employer’s plan isn’t required to accept rollovers. The IRS may waive the 60-day deadline when circumstances beyond your control caused the miss.

Related terms

Sources and further reading

• IRS: Rollovers of retirement plan and IRA distributions
• IRS: Retirement topics — termination of employment

Examples are illustrative and focus on U.S. personal finance. This page is educational, not individual financial, investment, tax, or legal advice. Read our editorial approach or report a correction.