How do I make an indirect rollover?

You’ve changed jobs and a distribution of your 401(k) account is being paid directly to you. To avoid paying taxes and possible penalties on that distribution, you now need to make an indirect rollover.

An indirect rollover, also known as a 60-day rollover, is when your previous retirement provider pays your account funds directly to you via check or electronic transfer for deposit into a personal account.

You are allowed to re-deposit these funds tax-free into another qualified retirement account within 60 days if you want to save those funds toward your retirement and if you want to avoid paying taxes and penalties on them. If you do not re-deposit your funds within 60 days, you may owe income taxes and tax penalties on the full amount of your distribution. 

Your previous provider may, however, have withheld mandatory 20% federal income taxes, early withdrawal penalties of 10% (unless you meet certain exemptions), and any applicable state taxes from your distribution. If this has happened, you are responsible for depositing the entire amount, including any taxes withheld, into your new retirement account at Guideline within 60 days of the distribution date to avoid a taxable event. 

Though we don’t recommend indirect rollovers, some people use the 60-day window as a short-term loan of their retirement assets. But be careful. If the full amount of your distribution is not deposited to a new custodian within 60 days, then any amounts not rolled over will be deemed taxable and may also be subject to early withdrawal penalties. The 60-day time frame is strictly enforced so you don’t want to miss it.

Rolling over an IRA to another IRA? There are some additional considerations to keep in mind: 

Ready to get started? Learn more about how to roll over your retirement account to Guideline.

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