Miss This 60-Day Deadline and the IRS Takes 30%

The 60-Day Deadline That Can Cost You 30% of Your Savings

The IRS gives you exactly 60 days to complete an indirect rollover. Not 60 business days. Not two months. Sixty calendar days from when the funds leave your original account. Miss this deadline, and you face two separate penalties that can devour nearly a third of your retirement savings.

How the Penalties Stack

When you receive a distribution from your 401(k) or IRA and fail to roll it into another qualified account within 60 days, the IRS treats it as a taxable distribution. The consequences:

Income tax: The entire distribution is added to your ordinary income for the year. Depending on your tax bracket, this could be 22%, 24%, 32%, or even 37% in federal taxes alone—plus state income tax if applicable.

Early withdrawal penalty: If you’re under 59½, add a 10% penalty on top of income taxes.

Combined impact example (age 50, 32% bracket):

Distribution: $100,000
Federal income tax (32%): $32,000
Early withdrawal penalty (10%): $10,000
State tax (5% example): $5,000
Total loss: $47,000

That’s 47% of your distribution—gone—because you missed a deadline by even one day.

Why Indirect Rollovers Are Risky

An indirect rollover occurs when your 401(k) or IRA sends the money to you rather than directly to a new custodian. The check is made payable to you. The funds hit your bank account. You’re responsible for depositing them into a new retirement account within 60 days.

The risks multiply:

Mandatory 20% withholding: Your old 401(k) must withhold 20% for taxes. You receive $80,000 on a $100,000 distribution. To complete the rollover, you must deposit the full $100,000—meaning you need $20,000 from other sources.

Spending temptation: The money is in your checking account. Emergencies happen. Unplanned expenses arise. The 60 days pass faster than expected.

Administrative delays: Banks hold large deposits. New account applications get delayed. Checks get lost in the mail. Any delay pushes you toward the deadline.

The Day-by-Day Countdown

The 60-day period begins the day after you receive the distribution—not the day you requested it. If a check is mailed to you on March 1 and you deposit it in your bank on March 5, your 60 days start on March 6. Day 60 is May 4.

If you’re depositing via check, remember that the rollover must be completed—meaning the new custodian must receive the funds—by day 60. Mail takes time. Processing takes time. A check mailed on day 58 may not arrive until day 63.

Safe practice: Complete your rollover deposit by day 45, giving yourself a 15-day buffer for any complications.

IRS Exceptions: Limited and Narrow

The IRS allows a self-certification process for late rollovers, but only for specific reasons:

Financial institution error or delay
Death or disability
Hospitalization
Incarceration
Restrictions imposed by a foreign country
Postal error
Distribution made due to IRS levy
Disaster relief areas (designated by IRS)

“I forgot,” “I didn’t know the rules,” and “I needed the money temporarily” are not acceptable excuses. If you don’t qualify for an exception, the penalty stands.

The Simple Solution: Direct Rollover

A direct rollover (trustee-to-trustee transfer) eliminates the 60-day risk entirely. The funds move directly from your old plan to your new IRA. You never receive a check. There’s no deadline to track. No withholding occurs.

Every major custodian—Fidelity, Schwab, Vanguard—provides direct rollover services. Most offer dedicated rollover specialists who handle the paperwork and coordination with your old plan.

The process:

Open an IRA at your chosen custodian
Complete a direct rollover request form
Provide your old plan’s information
Your new custodian coordinates the transfer
Funds arrive in your new IRA—no deadline stress

If You’ve Already Taken an Indirect Distribution

Time is critical. Immediately:

Calculate your exact 60-day deadline
Open or verify your IRA is ready to receive funds
Deposit the full distribution amount (not just what you received after withholding)
Use same-day wire transfer if close to the deadline
Confirm receipt in writing from your new custodian

The 60-day rollover window is unforgiving by design. The IRS wants you to keep retirement money in retirement accounts. When you take custody of the funds, you accept responsibility for returning them promptly. Miss the deadline, and 30% or more of your savings can vanish in taxes and penalties.