401(k) to Roth IRA

A 401(k)-to-Roth IRA rollover moves eligible workplace-plan money into a Roth IRA. Pre-tax money becomes taxable income; an eligible Roth 401(k) balance can move without current income tax. A direct rollover avoids mandatory withholding, but not conversion tax or tax reporting. Before moving anything, check the money's tax character, your plan's distribution rules, and what you would give up by leaving the plan.

This guide covers your own 401(k), not an inherited account. You do not have to choose between converting everything and doing nothing: keeping money in the plan or moving pre-tax money to a Traditional IRA may also be options.

First, identify which kind of money you have

Ask the administrator to separate pre-tax money, designated Roth money, and any non-Roth after-tax contributions. They do not all receive the same treatment. The table assumes an eligible distribution and a properly completed rollover.

An eligible rollover is not a regular IRA contribution: the annual contribution limit and the income ceiling for direct Roth IRA contributions do not cap the rollover. But an RMD, hardship distribution or other ineligible payment cannot become an ordinary rollover just because you deposit it in an IRA. See rollover eligibility and routes.

Employer match is not always pre-tax. A pre-tax match can remain tax-deferred or be converted to Roth with income tax. If the plan offers the optional Roth employer-contribution feature, you may elect Roth treatment for fully vested matching or nonelective contributions; those amounts are included in income when allocated. Check your records rather than inferring the match's treatment from your own payroll election. See IRS Notice 2024-2, section L.

How to request a direct rollover

1. Confirm availability. Ask which vested amounts the plan may distribute now, whether partial distributions are allowed, and whether any RMD, loan offset or employer-stock issue needs separate handling.
2. Get the receiving account's instructions. Open the appropriate IRA if needed, then give the plan the custodian's exact payee wording, account number and delivery instructions.
3. Specify the destination for each tax bucket. A pre-tax-to-Roth move is taxable even if a form simply calls it a rollover. Do not assume the administrator will choose your tax strategy.
4. Track the payment and records. Confirm receipt, tax character and how the money is invested. Ask both institutions for their processing estimates; there is no universal 5–10-business-day completion guarantee.

A direct rollover can travel electronically or by check. A custodian-payable check delivered through you is still direct; a check payable to you is generally a payment-to-you rollover subject to the usual 60-day deadline. Physical possession alone does not determine the category. Treasury Regulation §1.401(a)(31)-1, Q&A-4, expressly permits participant delivery of a properly payable check.

Direct rollovers avoid mandatory federal withholding and the participant's 60-day redeposit deadline. Both direct and 60-day plan-to-IRA rollovers are outside the IRA one-rollover-per-12-month limit. That limit generally concerns tax-free IRA-to-IRA 60-day rollovers; IRA-to-Roth conversions and trustee-to-trustee IRA transfers are also excluded. Direct routing does not remove the tax due on a Roth conversion.

Yes, a direct 401(k) rollover is reported

The plan generally issues Form 1099-R even for a direct rollover. These common codes describe the route, not a universal tax exemption:

• Code G: a direct rollover from the non-Roth plan account. A pre-tax-to-Roth IRA rollover has a taxable amount; a fully deferred rollover to a Traditional IRA generally does not.
• Code H: a direct rollover from a designated Roth account to a Roth IRA, with zero taxable amount for that rollover.

The receiving IRA custodian reports an ordinary plan-to-IRA rollover in Form 5498, box 2, including a plan-to-Roth IRA rollover. Box 3 is for a Traditional-IRA-to-Roth-IRA conversion, a different route. Keep the plan's basis records and compare the forms with what actually happened. The 2026 Forms 1099-R and 5498 instructions cover these distinctions.

On your return, a direct 401(k)-to-Roth IRA transaction is reported with pension/annuity distributions, not as an IRA distribution. Form 8606 Part II is for Traditional-IRA-to-Roth-IRA conversions; it is not required merely because you rolled a 401(k) directly to Roth. Other IRA activity may still require Form 8606. Use the final instructions for the year of the distribution, and arrange any needed estimated tax payments or extra withholding during the year rather than assuming the bill can wait until filing.

What the 20% withholding shortfall really means

When an eligible rollover distribution from a plan is paid to you, the taxable part is generally subject to mandatory 20% federal withholding. This is not a rule for every plan payment: a qualified Roth distribution has no taxable part, and special payments can have different rules. A direct rollover avoids the mandatory withholding.

Example: You receive an eligible distribution of $100,000, all pre-tax. The plan sends $20,000 to the IRS and pays you $80,000. Assume the rollover is completed within 60 days, you are under 59½, and no exception to the early-distribution tax applies.

In every row, the $20,000 withheld is credited as federal tax paid on your return. It is not an extra income tax charge and does not automatically become a $20,000 refund. Your total tax and other payments determine whether you owe more or receive a refund. Replacing the shortfall keeps the full amount in retirement savings and can avoid additional tax on the unrolled portion; it does not make a pre-tax-to-Roth rollover income-tax-free.

A direct rollover is a straightforward way to avoid financing that withholding gap. If money has already been paid to you, check the actual receipt date promptly. See the 60-day deadline and limited relief rules; do not assume relief will apply.

Which Roth five-year rule applies?

Separate these rules before planning a withdrawal. The Roth IRA chapter of Publication 590-B explains qualified distributions, conversion recapture and withdrawal ordering.

• Regular Roth IRA contributions: remaining regular contributions come out first under the ordering rules, without income tax or the 10% additional tax. They do not each have a five-year withdrawal lock.
• Taxable conversions and certain plan rollovers: each has a separate five-tax-year period beginning January 1 of its conversion/rollover tax year for a calendar-year taxpayer. Before age 59½, withdrawing the portion included in income can trigger 10% additional tax during that period unless an exception applies. It is not taxed as income a second time.
• Qualified Roth IRA distributions, including earnings: one IRA-wide clock starts with the first tax year for which you funded a Roth IRA. A distribution also needs age 59½, death, disability or the qualifying first-home condition (subject to the $10,000 lifetime limit). Age alone does not satisfy the five-year requirement.

For nonqualified withdrawals, combine all your Roth IRAs. Remaining regular contributions come out first. Conversion and rollover amounts generally follow by tax year, oldest year first: combine amounts received in the same tax year, then take that year's taxable portion before its nontaxable portion. Earnings come last. Rollovers that cross calendar years have additional ordering rules; retain both the distribution and deposit dates. For example, a fully taxable $100,000 rollover completed in June 2026 has a recapture period ending December 31, 2030. A $20,000 withdrawal allocated to that taxable rollover before January 1, 2031 would incur $2,000 of additional tax if you are still under 59½ and no exception applies. A withdrawal allocated to remaining regular contributions would have a different result.

Roth 401(k) years do not carry into the Roth IRA qualified-distribution clock. If your first Roth IRA funding is a rollover in 2026, that clock begins January 1, 2026. An earlier Roth IRA contribution year continues to count; opening another Roth IRA does not restart it.

There is an important basis distinction. When a qualified Roth 401(k) distribution is rolled into a Roth IRA, the entire rollover is treated as contribution basis for Roth IRA ordering. For a nonqualified plan distribution, only the rolled contribution basis receives that treatment; the rolled earnings remain earnings. New IRA earnings still need the IRA's qualified-distribution conditions. See Treasury Regulation §1.408A-10, Q&As 3–4. If the plan balance includes a recent in-plan Roth conversion, also check its separate recapture rules before withdrawing.

Can you convert only part of the balance?

Ask what distribution choices your plan offers. If it permits the needed partial distributions, you may convert part and leave the rest in the plan. Alternatively, an eligible pre-tax distribution can move to a Traditional IRA without current income tax, followed by separately chosen Roth conversions. That IRA balance can affect future backdoor Roth calculations.

Spreading conversions may help manage taxes, but lower income in a particular year does not guarantee a favorable result. Compare the complete returns, including deductions and income-linked costs, and remember that a completed Roth conversion cannot be undone by recharacterizing it back to Traditional.

What if you are still working?

An in-service distribution moves money out of the plan while you remain employed. Both the law and the plan's terms must permit a distribution of that money. Some plans allow distributions at age 59½ or of particular contribution sources; a hardship withdrawal is not eligible for rollover.

An in-plan Roth rollover moves non-Roth plan money to the Roth account inside the same plan. A plan may offer this for vested amounts that cannot yet be distributed outside the plan. It does not create permission to move those dollars to a Roth IRA. Previously untaxed amounts are included in income. See Notice 2013-74, Q&As 1–3.

Employer stock: check NUA before moving the shares

Appreciated employer securities may qualify for net unrealized appreciation (NUA) treatment if distributed in kind to a taxable account. For qualifying stock funded entirely with pre-tax money, the plan's cost is generally ordinary income at distribution; eligible appreciation while in the plan is deferred and taxed as long-term capital gain when sold. Appreciation after distribution has its own holding-period treatment. A 10% early-distribution tax may apply to the ordinary-income portion if no exception applies.

For illustration, stock worth $500,000 with $50,000 of plan cost has $450,000 of NUA. Those numbers identify the two tax components; they do not establish a tax bill or savings. The result depends on eligibility, sale timing, rates, other income and investment risk. An IRA rollover of the stock gives up the special NUA treatment for those shares; that does not mean keeping concentrated employer stock is always the better choice.

For the usual lump-sum route, the entire balance from all of the employer's qualified plans of the relevant kind must be distributed within one tax year after a qualifying event: death, reaching 59½, separation from service for an employee, or total and permanent disability for a self-employed participant. Qualifying shares can go to a taxable account while eligible non-stock assets are rolled over. Earlier distributions can affect eligibility, but there is no blanket rule that one partial distribution permanently destroys every later NUA possibility. Have the full distribution history reviewed before acting. Publication 575, “Distributions of employer securities,” also describes limited NUA treatment outside the lump-sum route.

What might you give up by leaving the plan?

• Access after separation. The usual age-55 exception applies to distributions from the employer plan after separation in or after the calendar year you turn 55, not to IRA withdrawals. Special earlier rules apply to qualifying public-safety employees and private-sector firefighters. Money left in the qualifying plan can retain that route; IRA withdrawals instead follow IRA rules and other available exceptions. Eligible pre-tax Traditional IRA money may later roll into an accepting employer plan, with access determined by that plan and the qualifying separation. Roth IRA money cannot roll back to an employer plan. This is not a permanent ban on every form of early access.
• Creditor protection. An ERISA-covered plan has federal anti-alienation protection, subject to exceptions such as qualifying domestic-relations orders; “protected from every creditor” is too broad. Owner-only plans generally are not covered by ERISA Title I. IRA protection outside bankruptcy depends on applicable state law.
• Bankruptcy treatment and records. The $1,711,975 federal IRA exemption cap for cases filed April 1, 2025–March 31, 2028 is not a universal cap on IRA money. Section 522(n) excludes amounts attributable to specified qualified-plan rollovers and their earnings from that cap. Commingling does not itself create an automatic statutory loss, but keep records that trace the source and earnings. Other exemptions or a court's interests-of-justice adjustment may apply. Do not assume every IRA-to-IRA move or Roth-conversion chain has identical protection; get advice on the actual transaction and jurisdiction.
• Plan features. Some plans offer useful investments, pricing or participant loans that an IRA does not. Loans depend on plan terms and statutory limits; an IRA cannot lend to its owner.
• Backdoor Roth tax treatment. Pre-tax Traditional, SEP and SIMPLE IRA balances affect the pro-rata calculation for an IRA conversion; 401(k) balances are not in that IRA pool. A zero Traditional IRA balance is not an eligibility requirement for a backdoor Roth. It can help avoid unwanted taxable allocation, but basis, year-end balances, distributions and conversions all matter.

An IRA may offer consolidation or investments and services you prefer. It is not automatically cheaper: compare fund expenses, advice fees, account charges and transaction costs using actual disclosures. Keeping money in the old plan or moving it to an accepting new plan may be reasonable alternatives. The IRS's current rollover explanations, Notice 2026-13, distinguish the plan and IRA withdrawal exceptions.

For the protection distinctions, see 29 U.S.C. §1056(d), 29 C.F.R. §2510.3-3, 11 U.S.C. §522(b)(3)(C), (b)(4), (d)(12) and (n), and the courts' April 2025 dollar adjustment (PDF).

At job departure, check these details

You generally are not required to empty the 401(k) just because you leave. Check vesting, pending final contributions, distribution dates, outstanding loans and any plan termination. A new employer's plan is not required to accept incoming rollovers.

Small balances: a plan may adopt involuntary distributions for vested benefits of $7,000 or less, with special balance-counting rules that can disregard prior rollover amounts. If an involuntary eligible distribution exceeds $1,000 and you make no election, it generally goes by direct rollover to an IRA selected for you, not automatically to a check that starts a 60-day clock. Smaller cash payments can be made to you. Respond to the notice so you know the destination. See Publication 560, “Involuntary cash-out of benefits.”

Non-Roth after-tax contributions: a partial distribution generally includes a proportional share of pre-tax money from the relevant account. Notice 2014-54 allows allocation among coordinated destinations; it does not let you label a mixed distribution “after-tax only.” For example, a $50,000 distribution from a $100,000 account containing $80,000 pre-tax and $20,000 after-tax consists of $40,000 pre-tax and $10,000 after-tax. A coordinated direct split can send those amounts to a Traditional IRA and Roth IRA, respectively, without current income tax. A designated Roth account is accounted for separately. See the IRS after-tax rollover explanation.

Frequently asked questions