How Long Do I Have to Rollover My 401(k) from a Previous Employer?

Zoritha Thompson
May 1
2 min read

If you’ve recently changed jobs or left your previous employer, one important financial decision you’ll need to make is what to do with your old 401(k). The good news is—you don’t have to leave that money behind. But the timing of a 401(k) rollover is critical to avoid taxes and penalties. Here's what you need to know.

The 60-Day Rollover Rule

When you receive a distribution from your 401(k) and plan to roll it into an IRA or another qualified retirement plan, you generally have 60 days from the date of the distribution to complete the rollover. If you miss this deadline, the IRS may treat the money as a withdrawal—subjecting you to income tax and possibly a 10% early withdrawal penalty if you're under age 59½.

Types of Rollovers: Direct vs. Indirect

Direct Rollover

Funds are transferred directly from your old 401(k) to your new IRA or employer-sponsored plan.
No taxes are withheld.
No 60-day window to worry about—this is the safest and most recommended method.

Indirect Rollover

The distribution is sent to you personally.
20% is typically withheld for federal taxes.
You must deposit the full amount (including the withheld 20%) into a new retirement account within 60 days to avoid taxes and penalties.

Example: If your 401(k) distribution is $10,000, you’ll only receive $8,000 after taxes. You must deposit the full $10,000 into your new account within 60 days—even though you only received $8,000.

What Happens If You Miss the 60-Day Window?

If you miss the 60-day deadline:

The amount becomes taxable income.
If you're under age 59½, you may also face a 10% early withdrawal penalty.
You can apply for a waiver or automatic extension under certain IRS hardship exemptions, but approval isn’t guaranteed.

Why You Shouldn’t Leave Your 401(k) Behind

Even though you can technically leave your 401(k) with your old employer, it’s often better to roll it over:

Consolidation: Keep all your retirement funds in one place.
More Investment Choices: IRAs typically offer a broader selection of investments.
Lower Fees: Old 401(k) plans may have higher administrative fees.

Next Steps to Rollover Your 401(k)

Decide where to roll it over (IRA or new employer plan).
Contact both your old and new plan providers to initiate the process.
Choose a direct rollover to simplify and protect your funds.
Complete within 60 days if you receive a distribution directly.

Final Thoughts

You have 60 days to roll over your 401(k) if you’ve taken a distribution. But to avoid the stress and potential tax issues, a direct rollover is almost always the smarter move. Don’t leave your retirement savings behind—take action early and protect your financial future.