If you are leaving your current employer and want to take the money in your 401k with you or you simply want to enjoy the benefits of an IRA you can roll money from your 401k to your IRA. A 401k to IRA rollover allows an employee to roll the money out of their 401k and into their IRA account.
This can be much better then attempting to take out a 401k withdrawal because the money is not going to be hit with taxes or any early withdraw penalty.
So, what happens when you do a roll? The first thing that happend when someone decided to do a roll is that the employee will recieve the assets in their account. Then they will have 60 days to deposit those assets into their IRA.
If the employee is unable to put the money into their IRA then it is treated as a withdraw and they will be forced to pay any taxes or penalties they need to according the the 401k withdrawal rules.
There is one big disadvantage to doing a roll. There is a 20% manual withholding to pay for any taxes you may have to pay. You may eventually get that extra 20% back, but when someone does a roll it is withheld.
What this means is that you will only be given 80% of the money that is in your account, but be forced to deposit 100% of the money into the new plan.
So, if you have $200,000 in a 401k and do a roll you would be given $160,000 and would have to come up with the remaining $40,000 in order to deposit the full amount within 60 days.
If you fail to deposit the full amount of money you had in your 401k into your IRA then the money that is left over will be treated as a withdraw.
