How Long You Have to Roll Over a 401(k) from an Old Employer (2024)

FAQs

How Long You Have to Roll Over a 401(k) from an Old Employer? ›

If the check is made payable directly to you, your plan administrator is required by the IRS to withhold 20% for taxes. As if that wouldn't be bad enough—you only have 60 days from the time of a withdrawal to put the money back into a tax-advantaged account like a 401(k) or IRA.

There's no required timeframe for rolling over your 401(k). If your balance is less than $5,000, your previous plan may be required to roll over your account. Note that if you do decide to do an indirect rollover, you'll have 60 days to deposit the check into your new 401(k) or IRA.

If you don't roll over your payment, it will be taxable (other than qualified Roth distributions and any amounts already taxed) and you may also be subject to additional tax unless you're eligible for one of the exceptions to the 10% additional tax on early distributions.

A 401(k) rollover is when you direct the transfer of the money in your 401(k) plan to a new 401(k) plan or IRA. The IRS gives you 60 days from the date you receive an IRA or retirement plan distribution to roll it over to another plan or IRA.

You just need to contact the administrator of your plan and fill out certain forms for the distribution of your 401(k) funds. However, the Internal Revenue Service (IRS) may charge you a penalty of 10% for early withdrawal if you don't roll your funds over, subject to certain exceptions.

Again, a 401(k) rollover can be handled either by your former employer, or you can simply cash out your 401(k) and deposit the money into an IRA within 60 days. Take the money and run.

If your old plan sends the rollover check made out to you instead of your new plan administrator, your old plan is required to withhold 20% of your balance in taxes, and you only have 60 days to deposit that money into a tax-advantaged retirement account, like a 401(k), or you could face early withdrawal penalties.

Key Takeaways

Leaving your 401(k) account with your employer can save you fees because the company can buy funds at institutional pricing rates. If you own appreciated company stock in your 401(k), transferring the stock to a brokerage account instead of an IRA can save on taxes.

The rule requires you to deposit all your funds into a new individual retirement account (IRA), 401(k), or other qualified retirement account within 60 days of the distribution. If you fail to meet the 60-day deadline, your retirement funds will be subject to income taxes.

How long do I have to rollover my 401k from a previous employer with Fidelity? ›

If you withdraw the assets from your former employer‑sponsored retirement plan, the check is made payable to you, and taxes are withheld, you may still be able to complete a 60-day rollover. Within 60 days of receiving the distribution check, you must deposit the money into a Rollover IRA to avoid current income taxes.

The U.S. Labor Department issued a rule that aims to raise the legal bar for investment advice to retirement savers. Rollovers from 401(k) plans to individual retirement accounts are a key focus of the “fiduciary” rule, attorneys said. Almost 5.7 million people rolled money to an IRA in 2020, according to IRS data.

Transferring Your 401(k) to Your Bank Account

That's typically an option when you stop working, but be aware that moving money to your checking or savings account may be considered a taxable distribution. As a result, you could owe income taxes, additional penalty taxes, and other complications could arise.

If you have more than $7,000 in your 401(k), you can leave the plan at your former employer indefinitely. Employers are not allowed to force you out at that level. “Many employers will simply leave you alone for years,” says Justin Pritchard, a certified financial planner at Approach Financial, Inc.

If you break the 60-day rule on accounts with pre-tax income such as a traditional 401(k) or traditional IRA, the IRS will factor that as income for this tax year. Remember, that money has not been subject to income tax yet. If you're under age 59 ½, then you'll be subject to an early withdrawal penalty, too.

You can withdraw your contributions (that's the original money you put into the account) tax- and penalty-free. But you'll owe ordinary income tax and a 10% penalty if you withdraw earnings (i.e. gains and dividends your investments made inside the account) from your Roth 401(k) prior to age 59 1/2.

If you have less than $5,000 in your former employer's 401(k) plan, you may be required to transfer your money out. If you have less than $1,000 in the account, your former employer will likely cut you a check for the appropriate amount.

Key Takeaways. There is usually no transfer fee for rolling over your 401(k) into a new tax-advantaged retirement account.

Opening the Floodgates of Litigation: The United States Supreme Court Rules That Individuals May Sue Their Employers For Mishandling 401K Retirement Plans.

Sometimes you need to tap into your investments to cover an unexpected expense. In these cases, yes – you can cash out your 401(k) while you're still employed. You have a few options, depending on your employer and circ*mstances. But beware that you'll likely owe income taxes on anything you take out.