Should I ask my 401(k) plan provider for a direct rollover or an indirect rollover?

A: If you have not already requested a rollover, let your current plan provider know that you want to do a direct rollover.

An indirect rollover involves a distribution from your 401(k) where your funds are distributed to you, rather than to a new retirement account.

Indirect rollovers are a little more tricky because they're subject to withholding equal to 20% of the 401(k) distribution amount. Additionally, any retirement funds distributed to you that are not rolled over into a new retirement account within 60 days are considered to be a cash withdrawal and are subject to income tax, plus a possible 10% penalty if you’re younger than age 59 ½.


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