401(k) Rollover to an IRA in 2026: Direct, 60-Day, Withholding

Two ways to move the money

When you leave an employer the plan must give you a written explanation of your options. Pub. 590-A (2025) says it has to arrive “no earlier than 90 days and no later than 30 days before the distribution is made”, unless you choose a shorter period after at least 30 days to decide. The choice you make on the form sets the tax result.

Source: IRS Publication 590-A (2025), Table 1-5; IRS Publication 575 (2025), Table 1; 26 U.S.C. 3405(c)(1) and 402(c)(3)(A); Instructions for Forms 1099-R and 5498 (2026), distribution code G.

A direct rollover does not need a wire. 26 CFR 1.401(a)(31)-1 Q&A-4 says “Providing the distributee with a check and instructing the distributee to deliver the check to the eligible retirement plan is a reasonable means of direct payment, provided that the check is made payable as follows”, naming the trustee “as trustee of” your IRA. If the check is made out to you, it is not a direct rollover and the 20% applies. Q&A-10 adds that the plan “is not required (but is permitted)” to split a distribution among several destinations, so ask whether it will pay one IRA and one new employer plan in the same distribution.

The 60-day clock with dates

Section 402(c)(3)(A) says the rollover is not allowed for a transfer “made after the 60th day following the day on which the distributee received the property distributed”. Counting is by calendar day, as Pub. 590-A's own example shows: received June 30, deadline August 29. The table applies the same count to five 2026 dates (our arithmetic).

Source: arithmetic on 26 U.S.C. 402(c)(3)(A); IRS Publication 590-A (2025), Time Limit for Making a Rollover Contribution.

Missing the date is expensive. Pub. 590-A (2025) says amounts not rolled over within 60 days must be treated as a taxable distribution, “taxable in the year distributed, even if the 60-day period expires in the next year”, and the 10% additional tax may apply. There are three ways out.

Source: IRS Publication 590-A (2025), Ways to get a waiver of the 60-day rollover requirement; Rev. Proc. 2020-46, section 3.

The twelve reasons in Rev. Proc. 2020-46 section 3.02(2) are: an error by the financial institution; a check misplaced and never cashed; money deposited in an account mistakenly thought to be a retirement plan; severe damage to the principal residence; a death in the family; serious illness of the taxpayer or a family member; incarceration; restrictions by a foreign country; a postal error; a levy under section 6331 whose proceeds were returned; delay by the distributing party in providing information the receiving plan required; and a distribution to a state unclaimed property fund. Pub. 590-A adds a point that matters for the next section: “The IRS can waive only the 60-day rollover requirement and not the other requirements for a valid rollover contribution.”

Two special clocks exist. A qualified plan loan offset, meaning a loan in good standing offset because the plan ends or you leave the job, can be rolled over by the due date of the tax return, with extensions, for the year of the offset; any other offset gets 60 days. And a frozen deposit does not count against the 60 days (26 U.S.C. 402(c)(7)).

What the 20% costs if you take the check

Pub. 575 (2025) gives the arithmetic in a $10,000 example: the payer withholds $2,000, you receive $8,000, and “you will have to get $2,000 from some other source to add to the $8,000” to roll over the entire $10,000. If you roll over only $8,000 the $2,000 is included in income, and the 10% additional tax may apply to it if you are under 59½. Scaled to larger balances (our arithmetic, all pretax):

Source: arithmetic on 26 U.S.C. 3405(c)(1) and IRS Publication 575 (2025) (payment-to-you option and Table 1). Income tax rates are not applied. Hypothetical balances.

The exceptions to the withholding are narrow. Pub. 590-A says the payer does not have to withhold if the year's eligible rollover distributions from the plan total less than $200, or if the distribution is only employer securities plus $200 or less of cash for fractional shares. Pub. 575 adds that NUA on employer stock is not withheld; see our page on net unrealized appreciation before moving company stock into an IRA.

Where the once-a-year rule applies and where it does not

The limit is in 26 U.S.C. 408(d)(3)(B): the rollover rule “does not apply to any amount” received from an IRA “if at any time during the 1-year period ending on the day of such receipt such individual received any other amount” from an IRA that was not taxed because of the rollover rule. Pub. 590-A (2025) puts it as “You can make only one rollover from an IRA to another (or the same) IRA in any 1-year period regardless of the number of IRAs you own”, and Announcement 2014-15 explains that the IRS adopted the Tax Court's aggregate reading in Bobrow v. Commissioner for IRA distributions from January 1, 2015.

Source: as cited. The last row is our reading of the statute and the chart.

The date logic: “The 1-year period begins on the date you receive the IRA distribution, not on the date you roll it over into an IRA.” In practice that means the rule is usually triggered after the plan money has already landed. A reader who rolls a 401(k) into IRA-1 and then takes a check from IRA-1 to move it to a self-directed IRA custodian has made the one IRA-to-IRA rollover for the next year; a second such check from any of their IRAs inside the 1-year period would be taxable and, Pub. 590-A notes, cannot be waived. The fix is the one the Announcement names: a transfer straight from one IRA trustee to the other “is not a rollover”.

What cannot be rolled over

Only an “eligible rollover distribution” can move tax-free to an IRA. 26 U.S.C. 402(c)(4) removes three things from it, and Pub. 590-A (2025) lists more.

Source: 26 U.S.C. 402(c)(4); IRS Publication 590-A (2025), Rollover From Employer's Plan Into an IRA; IRS Publication 590-B (2025).

After-tax money and the pro-rata split

If the 401(k) holds both pre-tax and after-tax dollars, Notice 2014-54 sets how they divide when one distribution goes to several places. Disbursements made at the same time are treated as a single distribution with a pro rata share of each. For direct rollovers, the notice says the pretax amount goes first to the direct rollover. Its Example 1 uses a $250,000 balance of $200,000 pretax and $50,000 after-tax, a $100,000 distribution, and gets an $80,000 pretax share. A $70,000 direct rollover to a new plan is all pretax; the $30,000 paid to the employee is $10,000 pretax and $20,000 after-tax; a later 60-day rollover of $12,000 to an IRA is $10,000 pretax and $2,000 after-tax. Pub. 575 (2025) adds that after-tax contributions you roll into a traditional IRA “become part of your basis (cost) in your IRAs” and are tracked on Form 8606. See our page on the pro-rata rule with illiquid IRA assets for what that basis does later.

The age 55 exception does not follow the money

The 10% additional tax is the cost most readers between 55 and 59½ do not see until after signing. 26 U.S.C. 72(t)(2)(A)(v) exempts a distribution “made to an employee after separation from service after attainment of age 55”. Section 72(t)(3)(A) then says: “Subparagraphs (A)(v) and (C) of paragraph (2) shall not apply to distributions from an individual retirement plan.” Subparagraph (C) is the QDRO exception. Pub. 575 (2025) requires the separation to occur “in or after the year in which you reach age 55”, and its example has a man who left at 49 and took money in the year he reached 55, which does not qualify.

Source: IRS Publication 575 (2025), Tax on Early Distributions; IRS Publication 590-B (2025), Early Distributions; 26 U.S.C. 72(t)(2) and (3)(A). Lists abbreviated; the CSV has all 15 rows for both account types.

At age 57, a $50,000 withdrawal costs $5,000 of 10% additional tax from an IRA and $0 from the plan if the exception applies, in both cases before income tax (our arithmetic). The Form 1099-R instructions confirm the plan side: code 2 is used for “a distribution from a qualified retirement plan after separation from service in or after the year the participant has reached age 55”. The practical sequence follows from that: money you may need before 59½ is taken from the plan first, and the rest is rolled.

If the destination is a self-directed IRA

Nothing in Pub. 590-A, Pub. 575 or the Code treats a rollover into a self-directed IRA differently from a rollover into any other IRA; the custodian is the trustee who accepts the money. We found no IRS text that changes the rollover step for a self-directed custodian, which is our reading. What differs is what happens next, and where the rollover touches illiquid assets.

• Cash or property in. A plan usually pays cash. If the plan pays property, Pub. 575 says “You can't keep the distributed property and roll over cash or other property”: roll the actual asset or sell it and roll the proceeds, and 26 U.S.C. 402(c)(1)(C) requires that the amount transferred “consists of the property distributed”. Selling and rolling the proceeds causes no gain or loss (402(c)(6)).
• Direct rollover to a self-directed custodian. The check rule of Q&A-4 applies: payable to the custodian “as trustee of” your IRA, or it is a payment to you with 20% withheld.
• After the money lands. Pub. 590-B says an IRA with $1,000 or more of unrelated trade or business gross income “must file a Form 990-T”; investing in collectibles is treated as a distribution; a prohibited transaction can end the IRA. Our pages on self-directed IRA real estate rules, Form 990-T for IRAs and SDIRA custodians cover those rules.
• Required withdrawals later. An IRA holding a non-traded fund still owes its RMD; see RMDs with illiquid IRA assets.
• Staying in the plan. For readers weighing a plan that offers private assets, see the DOL 401(k) alternative investments rule.

Before a sales channel moves it

FINRA Regulatory Notice 13-45 (December 30, 2013) said rollovers from employer plans were the largest source of contributions to IRAs, and that the party recommending one is often paid if you move and not if you stay: “a recommendation that an investor leave his plan assets with his old employer or roll the assets to a plan sponsored by a new employer likely results in little or no compensation for a firm or a registered representative.” It lists seven factors a rollover recommendation should weigh, and says it would be “false and misleading to imply that a retiree's only choice, or only sound choice, is to roll over her plan assets to an IRA sponsored by the broker-dealer”. The Notice is 2013 guidance under the suitability rule it cites; 17 CFR 240.15l-1 now requires a broker-dealer making “a recommendation of any securities transaction or investment strategy involving securities (including account recommendations) to a retail customer” to act in the retail customer's best interest. We read the Notice for its factor list, not for the current legal standard.

Source: FINRA Regulatory Notice 13-45 (December 30, 2013), section 2; 17 CFR 240.15l-1(a)(1). The questions are our wording of the Notice's factors.

What a reader can do with this

• Choose direct. Unless you need the cash, ask the plan for a direct rollover and for the check, if any, to be payable to the IRA trustee “as trustee of” your IRA. Ask whether it can pay more than one destination.
• If you took the check, count 60 days from receipt, put the withheld 20% back from other money if you want the whole amount rolled over, and write the deposit date down.
• Move IRA to IRA by transfer, not by check. After the plan money reaches an IRA, a trustee-to-trustee transfer is not limited by the once-a-year rule.
• In an RMD year, get the RMD out first. It cannot be rolled over.
• Between 55 and 59½, ask for the bridge money before the rollover. The age 55 exception does not survive in an IRA.
• Ask whether any of it is after-tax, and whether the destination IRA will report basis on Form 8606.
• Keep the records: the plan's 402(f) notice, the Form 1099-R (code G for a direct rollover), the IRA's Form 5498 and, if late, the self-certification letter.
• Do not decide on this page. Which route fits depends on your plan's terms, your age, your other IRAs and your state; that is for a CPA or adviser with your documents.

For how to choose among advisers by fee structure, see what a fee-only financial advisor is.

FAQ

Sources, read and saved on October 22, 2026: 26 U.S.C. 72, 401, 402, 408 and 3405 (Cornell Legal Information Institute); 26 CFR 1.401(a)(31)-1 (Cornell LII); 17 CFR 240.15l-1 (Cornell LII); IRS Publications 590-A (2025), 590-B (2025) and 575 (2025); Instructions for Forms 1099-R and 5498 (2026); IRS Rev. Proc. 2020-46; IRS Notice 2014-54; IRS Announcement 2014-15; FINRA Regulatory Notice 13-45 (December 30, 2013). Worked examples are our arithmetic on hypothetical figures. This is analysis of public documents, not investment, legal or tax advice.