Should I Roll Over My 401(k)? Key Things to Know.

Notebook labeled ‘401(k) Rollover’ on a desk with a calculator, pen, and cash, representing retirement planning.

January 9, 2026

Not all 401(k)s work the same way, so understanding the basics—and your rollover options—really matters. Changing jobs or getting ready to retire? These big transitions often come with important decisions about your retirement savings. You’ve worked hard to build these funds, and we’re here to help you stay informed and avoid common mistakes. “Many clients feel unsure about the choices in front of them—especially when tax consequences are involved,” explains Carrie Loven, Financial Advisor at First Mid. “We begin by learning what matters most to you to help you make informed decisions that support your long-term‑ goals.”

Life Events That Kickstart the Conversation

You may need to review your rollover options when:

Leaving a Job: As the most common reason, whether you quit, were laid off, or retired, you’re in control of where your money goes next.
Retirement: As you transition into retirement, it’s often easier to access your funds and complete a rollover, making it a good time to reevaluate your retirement accounts.
Age 59½: Hitting this milestone removes early withdrawal penalties, which can make rollovers more attractive.
Death: A surviving spouse or beneficiary might need to roll over inherited retirement funds.
Divorce or Separation: Splitting finances often means dividing and moving retirement assets in a process called a QDRO (Qualified Domestic Relations Order).

What You Can Do with Your Savings

When you leave an employer, you typically have four choices with your 401(k):

Leave the money in your former employer’s plan (if the plan rules allow)
Move it to your new job’s 401(k) (if the plan accepts rollovers)
Roll it over to an Individual Retirement Arrangement (IRA)
Cash it out (but be cautious as it usually means taxes and possibly penalties)

Key Factors to Consider

When you’re comparing your options, you should look at the fine print, including potential conflicts of interest:

Fees and Expenses: Both plans and IRAs have costs—compare carefully.
Investment Options: IRAs often offer more choices than many 401(k) plans.
Services: Consider whether you want advice, planning tools, or loan availability (IRAs don’t allow loans).
Creditor Protection: 401(k)s generally have stronger protection than IRAs.
RMDs (Required Minimum Distributions): If you plan to work into your 70s, your employer’s plan may allow you to delay RMDs.

You should also be aware of potential conflicts of interest if you roll your 401(k) into an IRA. “It’s important to know that any financial professional you speak with may benefit financially if you move your assets to their firm,” Carrie points out. “We believe in building that trust and clarity because we value transparency as much as we value your business.”

How to Move Your Money

If you decide a rollover is right for you, there are two main ways to move your money.

The Direct Rollover: Smooth Sailing

With a direct rollover, your money moves straight from your old employer’s plan to your new 401(k) or IRA. This is a simpler, cleaner option because taxes aren’t withheld during transfer, and you avoid potential early-withdrawal penalties.

The Indirect Rollover: Proceed with Caution

With an indirect rollover, the check is made payable to you personally and that’s where complications can arise:

20% withholding applies: Your former employer must withhold 20% for federal taxes right away.
You’re on a 60-day clock: You have 60 days to deposit the full amount, including the withheld 20%, into your new retirement account.
Miss the deadline, and it’s taxable: If you don’t deposit the full amount on time, the IRS treats it as a taxable distribution, and you may also face early-withdrawal penalties.

Because of these risks, many people prefer a direct rollover instead.