Accounts

Rollovers

You can move money from a 401(k) to an IRA when you leave a job for more flexibility and lower expenses
Catch Can HelpWant to roll your 401(k) into an IRA? Choose from Traditional, Roth, and SEP IRAs.
tl;drA rollover is when you move money from a 401(k) to an IRA. A rollover makes sense when you leave a job, because it gives you more investment options, lower fees, combined accounts, and the ability to continue contributing.

What is a rollover?

Moving funds from a 401(k) into an IRA is called a rollover.

Why do a rollover?

Consider a rollover when you change or leave jobs. If you had an employer-sponsored retirement account such as a 401(k), then you can roll it into an IRA. Reasons for doing a rollover include:

  • IRAs have more investment options
  • IRAs generally have lower fees and costs
  • You want to combine retirement accounts
  • You aren’t allowed to contribute to your employer-sponsored plan when you leave the employer

Types of rollovers

To avoid paying taxes on a rollover, then you must roll into a similar type of account. For example, rolling a Traditional 401(k) into a Traditional IRA would incur no taxes. Rolling a Roth 401(k) into a Roth IRA would also avoid taxes.

However, if you wanted to convert a Traditional 401(k) into a Roth IRA, that would incur taxes, because the money you contributed in the Traditional 401(k) was not taxed on the front end (pre-tax dollars), and the money that goes into a Roth IRA is (post-tax dollars). This type of rollover is called a Roth conversion. The amount you convert to a Roth from a Traditional account also counts as income for that tax year.

How do I do a rollover?

You can get in touch with the financial institution that manages your 401(k). The process can be quick and painless or long, depending on the custodian.

You can have the custodian roll the funds into an account with the same institution or have them send you a check that you can invest with a different one. If you choose the second option, make sure you complete the rollover immediately. If you wait longer than 60 days to roll it over, then the check will count as a distribution of income, and you’ll have to pay taxes and penalties.

Can I rollover accounts into Catch?

Yes.