What are the differences between a 401k rollover and a 401k transfer?

[DonReynolds]

401k rollovers and 401k transfers share some similarities, but the differences between a 401k rollover and a 401k transfer are what savvy investors hone in on to maximize their chances of retirement account success.

[My 2 cents]

401k rollovers and 401k transfers share some similarities, but the differences between a 401k rollover and a 401k transfer are what savvy investors hone in on to maximize their chances of retirement account success.

Is "savvy investors" an oxymoron?

[Tom Poje]

I guess by 'savvy' it means you will contact the original poster, to maximize 'his' business.

note how there was no attempt to even point out any differences/similarities between a rollover and transfer.

[david rigby]

Let's be cautious on something: "DonReynolds" appears to be using this post for marketing purposes.

OK, "Don" you are hereby notified that the purpose of these Message Boards is information sharing, not marketing. If you have something to share, please join in. If you choose to focus only on marketing, your posts will be deleted.

There are several regular users who (like myself) have "Moderator" below their picture. One or more of them can decide to "edit" posts that are not appropriate.

Welcome!

[My 2 cents]

401k rollovers and 401k transfers share some similarities, but the differences between a 401k rollover and a 401k transfer are what savvy investors hone in on to maximize their chances of retirement account success.

So, out of curiosity, what are the differences between a 401k rollover and a 401k transfer? Are you referring to rollovers/transfers out of 401(k) plans or into 401(k) plans?

As this is a forum for exchange of information, can you help educate all of us? Even those of us who do not work on 401(k) plans may have account balances in them.

[mbozek]

There is not much of a distinction between trustee to trustee transfers and rollovers of 401k plans. Trustee to trustee transfers are only permitted between qualified plans. A rollover is made to a different kind of plan, e.g, from a Q plan to a 403b plan or IRA either directly or indirectly. Transfer from a Q plan to a Roth IRA is both a rollover and conversion.

Both types of transfers are tax free except for rollover to a roth IRA.

Only distinction that is significant is that participant in 401k plan can rollover an existing plan loan to a new 401k plan to avoid having the outstanding loan balance being taxed as a distribution.

[david rigby]

... and sometimes the phrase "trustee to trustee transfer" is used when the actual event is a plan merger.

[Kevin C]

And in some cases, plan-to-plan transfers come with 411(d)(6) protection for the sending plan's features. Our VS document has a section on Qualified Transfers and rules for other transfers.

[DonReynolds]

When you decide to roll over an old 401k into a new 401k or a self-directed Individual Retirement Account (IRA), you can opt for an:

a. [/size]401k rollover, or a

b. [/size]401k transfer

You can use a 401k rollover or a 401k transfer to move your money away from your former employer, but the method in which the money is moved is the biggest difference between a 401k rollover and a 401k transfer, at least in the eyes of the IRS.

A 401k rollover means that your 401k provider liquidates the account and authorizes a check or bank wire in your name. Even if you re-invest the funds before the 60-day IRS limit, you’re still vulnerable to losing up to 30% in taxes and penalties with the swipe of a pen when you accept your old 401k money directly.

Instead of rolling over a 401k to yourself, many investors opt for a custodian-to-custodian transfer because the money goes directly from the 401k custodian to the IRA custodian. 401k owners never take direct possession of those funds during the 401k transfer process, which nullifies the need for countless hours of frivolous IRS paperwork.

Trustee-to-trustee 401k transfers are not currently subject to tax withholdings, and are exempt from the IRS’ recently-enacted “one rollover per year” rule.

Many 401k rollover advisers agree that it’s smarter to transfer a 401k rather than roll over the account, but please speak with a licensed tax attorney before making any decisions about your 401k rollover. For a free “401k rollover vs. 401k transfer” guide, call or visit today.

[austin3515]

Great write-up! I took out the phone # and web-site, but very informative post Perhaps you should add a signature line that references your Linked In page (settings, Signature)...

[K2retire]

Based on this description, Don is defining a rollover as only what I've heard of as an indirect or 60 day rollover and a transfer as what I've heard of as a direct rollover.

[austin3515]

It actually was well written and seemed factually accurate, even though I had the same thought as you.

[Mike Preston]

IMO, it was NOT well written. The writeup confuses direct rollover (which is referred to as a transfer) and "lump sum distribution, subject to mandatory withholding, followed by a personal rollover with the need or at least advisability of personally augmenting the funds received to the extent desirable and allowable", which is referred to as a "401(k) rollover".

Use of the term "transfer" is a confusion that those who are competent to advise would avoid in this circumstance. That word doesn't exist on the first few websites I just visited discussing rollover "options".