You can move money from an old 401(k) into a new one or into an IRA, but the process depends on whether you still work for the company that holds it

If you have left a job, you can roll your 401(k) balance into your current employer's plan (if they allow it), into an IRA you open yourself, or into your new employer's 401(k). If you still work for the company, you usually cannot touch the money until you leave or reach age 59½, though some plans allow in-service rollovers. The actual movement of money takes one to three weeks once you start the paperwork, but the decision about where to move it should come first.

The main routes are a direct rollover (the old plan sends money straight to the new account) and an indirect rollover (you receive a check and deposit it yourself within 60 days). Direct rollovers avoid taxes and penalties. Indirect rollovers carry a 20% withholding tax on the amount, though you can recover it later if you complete the deposit on time.

Key Takeaways

  • A direct rollover moves money from your old 401(k) straight to a new account without you handling the check, and avoids the 20% withholding tax that comes with indirect rollovers.
  • You can roll a 401(k) into an IRA, your current employer's plan, or your new employer's plan, but each destination has different rules about fees, investment options, and loan availability.
  • If you still work for the company that holds your 401(k), you cannot usually move the money until you leave the job, though some plans allow in-service rollovers at age 59½.
  • An indirect rollover requires you to deposit the check within 60 days or face income tax and a 10% penalty on the full amount, even though only 80% was sent to you.
  • Rolling into an IRA gives you more investment choices and lower fees than most 401(k)s, but you lose access to the plan's loan feature and creditor protections.

Direct rollover vs. indirect rollover: which one to choose

A direct rollover is the safer route. You contact your old plan's administrator (usually through your former employer's HR or benefits department) and request a direct rollover form. You name the new account as the destination—an IRA at a brokerage, your new employer's 401(k), or your current employer's plan. The old plan sends the money directly to that account. You never see the check. No withholding happens, and the full balance moves over.

An indirect rollover means the old plan sends you a check for the balance minus 20% withholding. You then have 60 calendar days to deposit that check into a new IRA or 401(k). If you miss the deadline, the full amount (including the 20% withheld) counts as taxable income for that year, plus a 10% early withdrawal penalty if you are under 59½. You can recover the 20% withheld when you file taxes, but only if you completed the deposit on time. This route creates unnecessary risk and should only be used if the old plan refuses a direct rollover, which is rare.

Rolling into an IRA: more choices, fewer restrictions

An IRA rollover (usually a Traditional IRA) is the most common destination for old 401(k) money. You open an IRA at a brokerage—Fidelity, Vanguard, Charles Schwab, or another firm—and request a direct rollover from your old 401(k). The money lands in the IRA within one to three weeks.

The main advantage is choice. An IRA lets you invest in stocks, bonds, mutual funds, ETFs, and other securities without the limited menu most 401(k)s offer. Fees are usually lower too. The trade-off is that you lose the 401(k)'s loan feature (you cannot borrow against an IRA balance) and some creditor protections that vary by state. If you have a Roth 401(k), you can roll it into a Roth IRA to keep the tax-free growth, but you must use a Roth IRA, not a Traditional one.

One rule to watch: if you roll a 401(k) into an IRA and later want to do a backdoor Roth conversion, the IRS will count all your Traditional IRAs (including the rolled-over 401(k) money) when calculating taxes. This can make the backdoor strategy expensive or impossible. If you think you might do a backdoor Roth later, ask whether your new employer's 401(k) accepts rollovers before you move the money to an IRA.

Rolling into your new employer's 401(k): keeping it all in one place

If your new employer's plan allows it, you can roll your old 401(k) directly into the new one. This keeps all your retirement money in a single 401(k) and simplifies record-keeping. Request a direct rollover form from your old plan's administrator and name your new employer's plan as the destination.

The downside is that you are limited to whatever investments the new plan offers, which may be narrower than an IRA. You also pay whatever fees the new plan charges. However, you keep access to the plan's loan feature (if it has one) and maintain the creditor protections that come with 401(k)s. If you leave that job later, you can roll the combined balance into an IRA or your next employer's plan.

Rolling into your current employer's plan: the in-service rollover

Some employers allow in-service rollovers, which means you can move money from an old 401(k) into your current employer's plan while you still work there. This is not common, and rules vary widely. Some plans only allow it after you turn 59½. Others allow it anytime. You have to ask your current employer's HR or benefits department whether the plan permits it.

If your plan does allow in-service rollovers, the process is the same as rolling into a new employer's plan: you request a direct rollover form and name your current plan as the destination. The money arrives within one to three weeks. This option is useful if you want to consolidate accounts without leaving your job, but it only works if your employer's plan has this feature.

What happens to loans, employer match, and vesting

If you have an outstanding loan against your old 401(k), you must repay it before rolling over the remaining balance. If you cannot repay it, the unpaid balance is treated as a distribution and becomes taxable income plus a 10% penalty if you are under 59½. Contact your old plan's administrator to find out the loan payoff amount.

Employer match money and any vesting you have already earned rolls over with you—that money is yours. Unvested match does not roll over; it stays with the old employer. The vesting schedule does not follow you to the new account, so any money that lands in your new IRA or 401(k) is immediately 100% yours.

If you are still employed and your current employer's plan allows in-service rollovers, you can move old 401(k) money without affecting future employer match. If you roll money out after leaving a job, you simply will not receive match from that employer anymore—the match only applies to salary deferrals you make going forward at the new job.

Timing: when to start the rollover process

You can roll over a 401(k) anytime after you leave a job. There is no deadline, though waiting longer means the money sits in an old account you may forget about. Some old plans charge higher fees or offer outdated investments, so rolling over sooner usually makes sense.

If you are still employed, you cannot roll over money unless your plan allows in-service rollovers. Once you leave the job, the money becomes available to roll immediately. If you receive a check (indirect rollover), the 60-day clock starts the day you receive it, not the day you request it. Mark your calendar and deposit it well before day 60 to avoid missing the deadline.

Frequently Asked Questions

Can I merge two 401(k)s from different employers?

Not directly. You can roll each one separately into an IRA, into your current employer's plan (if it accepts rollovers), or into your new employer's plan. Rolling both into a single IRA is the simplest way to merge them. You would request a direct rollover from the first 401(k) to a new IRA, then request a direct rollover from the second 401(k) to that same IRA.

What if my old employer went out of business?

The plan is usually transferred to another administrator or trustee. Contact your old employer's HR department or look for paperwork about the transfer. If you cannot find the plan, the Department of Labor maintains a database of abandoned plans. Once you locate the current administrator, you can request a direct rollover the same way.

Do I have to roll over the entire balance?

No. You can roll over part of the balance and leave the rest in the old plan, though most people roll everything. If you take a partial distribution (money you do not roll over), that amount is taxable and subject to a 10% penalty if you are under 59½. A direct rollover avoids this, so it is the better choice for any amount you want to move.

What if I have a Roth 401(k)?

You can roll a Roth 401(k) into a Roth IRA to keep the tax-free growth. If you roll it into a Traditional IRA instead, the money becomes taxable, which defeats the purpose. Request a direct rollover to a Roth IRA specifically. If your new employer's plan has a Roth option, you can roll into that instead.

How long does the rollover take?

A direct rollover usually takes one to three weeks from the date you submit the rollover form. The old plan's administrator processes the request and sends the money to the new account. An indirect rollover (where you receive a check) depends on how fast you deposit it, but the old plan typically mails the check within five to ten business days. Do not wait until day 59 to deposit an indirect rollover check.