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Rollover IRA

One way to take control of your retirement savings is to roll over your prior retirement plan from a former employer.

Why roll over to an IRA?

It is a process that allows you to move funds from your previous employer-sponsored retirement plan, a 401(k), for example, into an IRA. When you roll over your old retirement account into an IRA, you can preserve the tax-deferred status of your retirement assets without paying current taxes or early withdrawal penalties at the time of transfer. 

When it comes to rolling over a prior retirement plan, you have other options.

Before you start the rollover process, be sure to review all your options, including:

  • Leaving your money in your former employer's plan if your former employer permits it
  • Rolling over your money to a new 401(k) plan if this option is available
  • Rolling over your 401(k) to an IRA
  • Taking a cash distribution, which could result in taxes and a 10% penalty
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What are the benefits of rolling over to an IRA?

  • A tax-smart way to keep your money invested and avoid withdrawal penalties

    You can preserve the tax-deferred status of your retirement assets without paying current taxes or early withdrawal penalties at the time of transfer.

  • Pay no annual fees

    Unlike most plans, with a Schwab IRA, there are no account open or maintenance fees, regardless of your account balance or how often you trade. Other account fees, fund expenses, and brokerage commissions may apply.1

  • Wide range of investment choices

    Take advantage of an array of investment choices, including stocksbondsCDsETFs, and mutual funds that may meet your retirement goals and risk tolerance.

How to roll over your old 401(k) into a Schwab IRA

Follow our three-step process to roll over your old 401(k) or other employer-sponsored account into a Schwab IRA and take control of your retirement savings. 

  • Apply for an IRA to get started. 
  • Contact your former employer's plan administrator to roll over your plan assets. 
  • Complete any forms required by your former employer. 
  • Decide how you want your retirement assets distributed. 
  • Ask your employer to deposit your funds directly into your Schwab IRA. To prevent funds from being taxed, the check should be made payable to "Charles Schwab & Co., Inc., FBO (Your Name)."
  • For an easy deposit, give your employer your Schwab IRA account number and ask them to include it on the check. 
  • Instruct your employer to mail the check to: Charles Schwab & Co., Inc., Box 628291, Orlando, FL 32861-8291
  • If your employer made your rollover distribution check payable to you rather than to Schwab, see our Rollover IRA common questions to find out what to do. 
     

No fees or commissions with Schwab IRAs

Schwab's IRA options have no minimum deposit and $0 online listed equity trade commissions, regardless of your account balance or how often you trade.2

Interested in a Traditional IRA rollover? Learn more about contribution maximums and withdrawal rules

Interested in a Roth IRA rollover? Learn more about contribution maximums and withdrawal rules

Compare Traditional and Roth IRAs and decide which option is right for you.

2. Standard online $0 commission does not apply to over-the-counter (OTC) equities, transaction-fee mutual funds, futures, fixed-income investments, or trades placed directly on a foreign exchange or in the Canadian market. Options trades will be subject to the standard $0.65 per-contract fee. Service charges apply for trades placed through a broker ($25) or by automated phone ($5). Exchange process, ADR, and Stock Borrow fees still apply. See the Charles Schwab Pricing Guide for Individual Investors for full fee and commission schedules. Employee equity compensation transactions are subject to separate commission schedules.

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Common questions

Schwab will send you your account number as soon as your application is completed and approved. You can use your account number to log in and manage your account. 

Choose from stocks, bonds, ETFs, mutual funds, CDs, and more. Schwab also offers professional portfolio management solutions that can make investing even easier. As a Schwab client, you can have a complimentary consultation with a Schwab investment professional who can help you decide which investments are right for you. Just give us a call at 866-855-5635. We're here and happy to help.

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 withholding. See the question below about direct and indirect roll overs to understand both options and their tax consequences. 

 

A transfer of assets is when you instruct your retirement account provider to move funds directly 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. You only pay fees for transactions you make in the account, such as trading stocks, or for investments you hold in the account, such as operating expenses on mutual funds. See the Charles Schwab Pricing Guide for Individual Investors and its amendments for comprehensive details on fees.

Eligible employer-sponsored retirement plans are those that you receive qualifying distributions from and 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 roll over.

With a direct roll over from an employer-sponsored plan to an IRA, the administrator of your plan delivers your distribution directly to the financial provider where your Rollover IRA is held. Since you never actually take possession of your assets, there is no mandatory 20% federal tax withholding. 

 

With an indirect rollover, you do receive the assets from your employer-sponsored plan and roll over either all or a portion of the assets into another eligible plan within 60 days of receiving the distribution. Your employer may be required to withhold 20% for federal income tax. However, you can recover the deduction if you roll over the amount you received from your prior employer plus the 20% that was deducted. You will receive the refund in the form of a tax credit when you file your tax return.
 

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 deduction if 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 866-855-5635 and we will work 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 for tracking your tax basis. All rollovers are tax-reportable events on IRS Form 1099-R for the distributed amount and Form 5498 for the contributed (roll over) 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, you should check with your new employer regarding their plan's rules.

Questions? We're ready to help.