A 401(k) rollover is a distribution from a 401(k) plan that is transferred (rolled over) to an IRA or to another 401(k) plan. In some cases rollovers can be made to other retirement plans such as a 401(b) or 457 plans as well.
A direct rollover is one in which the 401(k) plan trustee sends the funds directly to the rollover institution.
An indirect rollover is one in which the 401(k) plan trustee sends the funds to the participant, who then has 60 days to deposit the funds with the rollover institution.
Almost all 401(k) plans will accept rollovers from other 401(k) plans, but many plans other than 401(k) plans will not accept them. You should ask the receiving plan's administrator first.
The benefit of the rollover is that it keeps the deferred tax status of the 401(k) money intact; no taxes are due when a rollover is completed.
There is no limit to the number of rollovers you can make. It is always preferable to make a direct rollover and avoid any possibility of taxes being due if a mistake on an indirect rollover occurs.
Steve Webb is located in Southern California and has been writing professionally since 2009. Webb is an expert in the areas of investing, banking and finance. He holds a Master of Business Administration from California State University, San Bernardino, a Bachelor of Arts in economics from the University of California, San Diego and is a Certified Treasury Professional and an Accredited Pension Representative.