Can I Move My 401k to an IRA Without Penalty?

Can I move my 401k to an IRA without penalty

If you’re planning on rolling over your 401(k) into an IRA, it is essential that you understand the process involved. Many 401(k) plans offer direct rollover, where money never touches your hands before being transferred directly into an IRA within 60 days.

Traditional IRAs also provide greater investment control and options compared to 401(k) accounts, so it may make more sense for your savings to move to an IRA account.


IRAs are personal accounts under your control that offer more investment options than workplace plans. Before making this move, however, it’s essential to carefully consider why you wish to transfer savings into an IRA account.

An employer-sponsored 401(k) may incur high fees or restrict the range of investments available to you, and withdrawing before age 59 1/2 could incur an early withdrawal penalty of 10%.

If you need guidance in choosing what course of action to take, speak to a financial planner. He or she can assist in deciding whether you wish to transfer your 401(k) assets to an IRA or keep them with your old employer’s plan. But keep in mind that new rules restrict individuals to one rollover per 12-month period when making transfers between IRAs – this applies equally for SEP and SIMPLE accounts.


Moving an IRA requires some associated fees, which could include administrative and investment management expenses that can add up over time and reduce returns; however, these costs are typically lower than what 401(k) investors pay due to lack of economies of scale present with employer-sponsored retirement plans.

When rolling over your IRA, it is essential that you follow the instructions of your new provider. Each brokerage or robo-advisor may have its own rollover process, so be sure to contact them beforehand in order to learn exactly what steps they require for you.

Consider also that IRAs do incur fees, although these tend to be much less than the fees charged by your old company’s 401(k). Furthermore, annual investment fees tend to be cheaper for IRAs since they do not face as many regulatory burdens.

Investment options

Baby boomers tend to switch jobs frequently (on average 12 times), which requires you to roll over old 401(k) accounts into an IRA in order to gain greater control of your investments and take advantage of any cash incentives offered by brokerage firms in exchange for rolling them over. To do this successfully, it is crucial that all the money is transferred into its appropriate accounts in an orderly fashion, so make sure all pre-tax and Roth funds can be accepted by your IRA before initiating this transition process.

Some 401(k) plans can be burdened by high fees and administrative charges that exceed those charged by large institutional investors that IRAs gain access to. Furthermore, many people choose IRA providers over employer-sponsored retirement plans because their investment options tend to be more varied; that’s why many opt to transfer their 401(k) savings; it can often be beneficial. But it may not always be best for everyone.

Choosing a custodian

An IRA rollover can help give you greater control of your retirement savings. Before attempting this move, however, it’s wise to carefully consider all of its potential benefits and drawbacks; some IRA institutions require certain procedures when performing such transfers, while some even withhold 20% for taxes upon distribution of this transfer.

An additional factor to keep in mind when selecting an IRA is that these plans typically charge higher fees than employer-sponsored plans, although these additional costs might be worth paying for more control. Your financial advisor can assist with finding an IRA provider who provides cost-effective investment management options.

As part of your IRA selection, it’s also vital that you select an appropriate custodian. Some IRAs only accept checks made out to the IRA itself rather than you, which could make rolling over Roth and pre-tax funds difficult unless separate checks were issued to each money type. Furthermore, review each institution’s rollover process before moving your 401(k). Lastly, ensure they offer low minimum balance requirements with a variety of investments available for you.

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