How to Roll Over Your 401(k) to an IRA

When leaving your job, you can typically cash out your 401(k) or roll it over into a different retirement account.

By Robin Hartill, CFP – Updated May 29, 2025 at 9:38 PM | Fact-checked by Frank Bass

Key Points

Rolling over a 401(k) into an IRA provides more investment choices.
If you don't opt for a direct rollover, you must deposit 401(k) funds to another retirement account within 60 days to avoid penalties.
Choose a brokerage for an IRA that offers low fees and good service.

Both a 401(k) and IRA are tax-advantaged retirement accounts, but they work differently. 401(k)s are sponsored by employers and often offer limited investment options.

IRAs aren't linked to employment. You can open one with any brokerage firm or other financial institutions. IRAs have a wider variety of investment selections, but they require more hands-on management.

Loading paragraph...

An infographic walking through the five steps of how to roll over a 401(k) plan into an IRA. — Image source: The Motley Fool.

Loading image...

Because 401(k)s are offered through employers, you'll need to determine what to do with yours when you leave your job. Your options include:

Leave it invested.
Roll over to a new 401(k).
Roll over to an IRA.

There are plenty of pros and cons to these options, but let's take a close look at when rolling your workplace 401(k) into an IRA may make sense for you.

Loading paragraph...

Employee Stock Ownership Plan (ESOP)

An employee stock ownership plan (ESOP) is a benefit structure that pays workers in company shares.

Loading paragraph...

3. Complete the required paperwork.

Chances are you'll have forms to complete with your 401(k) administrator to arrange for the money to be transferred. Generally, during the rollover process, whatever investments you have will be sold and cash will be deposited into your new account.

4. Get your money into your new IRA ASAP.

If your 401(k) administrator doesn't transfer the money directly to your new IRA, you must deposit it within 60 days to avoid tax penalties associated with early withdrawals.

Loading paragraph...

5. Invest your newly deposited funds.

You'll have to choose investments for your new IRA so your money can grow. Make sure to maintain an appropriate asset allocation given your age, and consider your risk tolerance.

Finally, when your new IRA has been opened, be sure to read up on common IRA mistakes to avoid, such as forgetting required minimum distributions, not designating beneficiaries, and trading too often in the account.

Loading paragraph...

Loading faq...

About the Author

Robin Hartill, CFP, is a contributing writer at The Motley Fool. Robin’s work has also been published by Yahoo Finance, USA Today, and Penny Hoarder. She is a graduate of the University of Florida.

TMFRobinHartill

The Motley Fool has a disclosure policy.