Rollover.

In plain English

A rollover is the IRS-approved way to move retirement funds, most commonly from an old employer's 401(k) into an IRA when you change jobs, or between two IRAs at different brokerages. Done correctly, no tax is owed and the money keeps growing tax-deferred (or tax-free, for Roth-to-Roth rollovers). The cleanest method is a 'direct rollover,' where the old plan transfers funds directly to the new account. An 'indirect rollover' (where you receive a check and then deposit it within 60 days) works but has tax-withholding traps and a once-per-year limit for IRAs.

01Why it matters

When you leave a job, your 401(k) doesn't go with you automatically. Your options are usually: leave it in the old plan, roll it to your new employer's 401(k), roll it to an IRA, or cash it out (almost always a bad move, you owe income tax plus a 10% penalty if under age 59½). Rolling to an IRA typically gives you more investment choices and lower fees than most 401(k)s. Forgotten old 401(k)s are extremely common and easy to consolidate when you remember.

02The math, step by step

You leave Job A where you have a $40,000 401(k) and join Job B. You open a Traditional IRA at a low-cost brokerage and request a direct rollover from Job A's 401(k) plan. Job A's plan administrator wires $40,000 to your new IRA, no tax, no penalty, no withholding. The money stays invested and tax-deferred. You now control the investments and pay much lower fees than the old 401(k) likely charged.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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