Rollover (Retirement)
Moving retirement funds from one tax-advantaged account to another without triggering a taxable event.
What is Rollover?
A rollover is the transfer of funds from one tax-advantaged retirement account to another — typically from a former employer's 401(k) to an IRA or a new employer's plan — without triggering taxes or penalties. A direct (trustee-to-trustee) rollover moves funds directly between institutions, avoiding mandatory 20% withholding. An indirect rollover distributes funds to the account holder, who must redeposit the full amount within 60 days; taxes are withheld and must be made up from personal funds. Rollovers preserve the tax-advantaged status of retirement savings and consolidate accounts for simpler management.
Example
An employee leaves a job with $120,000 in a former employer's 401(k). They request a direct rollover to a Traditional IRA at Vanguard. The funds move directly, no taxes are withheld, and the IRA now holds $120,000 in a self-directed account.
Source: IRS — Rollover Chart