IRA Rollover Options Explained
IRA rollovers have gotten surprisingly nuanced with all the different account types floating around. As someone who’s helped people consolidate messy retirement account situations, I learned everything there is to know about these transfers. Today, I will share it all with you.
The basic appeal of IRAs is flexibility. Your old employer’s plan had maybe 20 investment options. An IRA can access thousands – individual stocks, bonds, ETFs, sector funds, whatever you want.
What Can Actually Go Into an IRA?
Pretty much any retirement account, with a few timing restrictions:
401(k), 403(b), and 457(b) plans – the standard employer plans. Both pre-tax and Roth versions can roll over (to matching IRA types, obviously).
Traditional pensions – if you get a lump-sum distribution offer, that can go straight into a traditional IRA.
TSP accounts – federal employees can move their Thrift Savings Plan money to IRAs when they leave.
SIMPLE IRAs – here’s a catch. You need to wait two years after your first contribution before rolling to a traditional IRA. Miss that timing and you get hit with a 25% penalty. Ask me how I know.
SEP IRAs – self-employed folks can consolidate these into a traditional IRA anytime.
Traditional IRA Moves
Traditional IRAs accept pre-tax retirement money. Your 401(k), 403(b), or 457(b) pre-tax balances can roll in directly. Other traditional, SEP, and SIMPLE IRAs (after the waiting period) can consolidate here too.
One thing people don’t realize: traditional IRA money can actually roll INTO a 401(k) if your plan accepts incoming rollovers. This matters for backdoor Roth strategies. I’m apparently one of those people who finds this useful, but it’s an advanced move.
Roth IRA Moves
Roth IRAs only accept after-tax money that’s already been taxed:
Roth 401(k) and 403(b) balances transfer directly. Other Roth IRAs consolidate with no limits on transfers.
And yes, you can convert pre-tax money to Roth – but you’re triggering taxes when you do. That’s a Roth conversion, not a rollover. Different beast.
Picking Where to Open Your IRA
Not all custodians are equal. Here’s what actually matters:
Fees. Compare account fees, trading commissions, and especially fund expense ratios. The differences add up over decades.
Investment selection. Make sure they have what you want to buy. Some custodians restrict certain fund families.
Tools and research. If you’re managing your own investments, good planning tools and research resources help.
Customer service. When you need help at 9pm, can you actually reach someone? This matters more than people admit.
Why Consolidation Makes Life Easier
That’s what makes the IRA rollover endearing to us organization types – getting everything in one place just simplifies life:
- One login, one set of statements, one beneficiary form to update
- Required minimum distributions are way easier to calculate
- You can actually see your total retirement picture
- Probably lower overall fees once you consolidate
Probably should have mentioned: don’t rush this decision. Look at what you’re leaving behind. Some employer plans have great institutional funds or unique options you can’t replicate. Roll over deliberately, not automatically.
