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A Rollover IRA is an account that allows you to move your assets from a
(such as a 401(k) plan) by “rolling over” the funds into an IRA. A Rollover IRA preserves the
status of your retirement assets, allowing you to avoid current taxes and early withdrawal penalties on payouts you receive from your employer’s retirement plan when you change jobs or retire.
Within a Rollover IRA, you can choose from thousands of investments, including stocks, bonds, CDs, and mutual funds.
A rollover is when you move funds from one eligible retirement plan to another, such as from a 401(k) to a Rollover IRA. Rollover distributions are reported to the IRS and may be subject to federal income tax.
A transfer of assets is when you move funds between two accounts of the same type, such as from one Traditional IRA to another Traditional IRA. Transfers can take place as often as you like. They are not reported to the IRS because you never take possession of your money.
There are no fees to open or maintain a Rollover IRA at Schwab. The only fees you pay will be for transactions you make in the account, such as trading stocks or opening a CD or money market fund. See the Charles Schwab Pricing Guide for Individual Investors
(the "Guide") and any amendments to the Guide for comprehensive details on fees.
You can choose from many investment options that meet your goals and risk tolerance, including stocks, bonds, CDs, ETFs, and mutual funds.
If you receive qualifying distributions from them, eligible employer-sponsored retirement plans include 401(k) plans, 403(b) plans, profit-sharing plans, money purchase plans, and Keoghs/Qualified Retirement Plans (QRPs).
Plans that may not be eligible include employee stock ownership plans (ESOPs) and defined benefit plans.
You may be allowed to roll over after-tax dollars and governmental 457(b) qualifying distributions. Contact your plan administrator(s) to find out if your particular plan is eligible for rollover.
A 60-day rollover allows you to move money between IRAs by taking a distribution from one IRA and rolling it over to a different IRA. There are a few restrictions:
- You may execute only one 60-day rollover every rolling 12-month period per IRA. This 12-month period is measured from the original date of distribution.
- For one year from the date of the rollover, you may not make a tax-free rollover from either the distributing or receiving IRA involved in the 60-day rollover.
- You must complete the rollover within 60 calendar days of receiving the distribution, or your distribution is treated by the IRS as income and is subject to tax and penalties.
Check with your tax advisor for help in deciding what's best for your individual situation.
With a direct rollover, you never actually take possession of your retirement assets. Rather, you request that the trustee or administrator of your employer-sponsored retirement plan deliver your distribution directly to either the financial provider where your Rollover IRA is held or another eligible retirement plan.
Since you never directly take possession of the assets, there is no mandatory 20% federal tax withholding for this type of rollover.
With an indirect rollover, you receive the assets from your employer-sponsored plan and roll over either all or a portion of the assets into another eligible retirement plan within 60 days of receiving the distribution.
Please note that your employer may be required to withhold 20% for federal income tax. However, you can recover the deducted amount by making sure that you roll over the amount you received from your prior employer plus the amount that was deducted within 60 days.
By funding your new retirement plan with 100% of your payout, you will receive the refund in the form of a tax credit when you file your tax return.
Check with your tax advisor for help in deciding what’s best for your individual situation.
If your employer sends you a rollover distribution check made payable to you, you can deposit it directly into your Rollover IRA. Be sure to write your Schwab Rollover IRA account number on the check and deposit it within 60 days to avoid taxes and penalties.
Your plan administrator may have withheld 20% for federal income tax. You can recover the deducted amount by making sure that you roll over the amount you received from your prior employer plus the 20% that was deducted.
Please see IRS Publication 590 or talk with your tax advisor for more details.
Call a Schwab Rollover Consultant at 866-855-9095 for help in opening a Rollover IRA and working with your former plan administrator to make sure your retirement savings are rolled over properly. Please talk with your tax advisor for details about your specific situation.
Yes, you are responsible. Schwab does not track tax basis.
All rollovers are reportable events on IRS Form 1099-R for the distributed amount and Form 5498 for the contributed (rollover) amount.
Yes, but if you do, you may not be able to roll the IRA into a new employer-sponsored retirement plan. Different plans determine which assets, if any, will be accepted. If you think you might start a new job in the future, keep this in mind. You should check with your new employer regarding their plan's rules.
This tax information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends that you consult with a qualified tax advisor, CPA, financial planner, or investment manager.