401 (k) Rollover

One of the most important job benefits for the average worker is the option to commit money to tax-advantaged retirement accounts such as 401k plans. If you leave a job where you had saved money in a 401k plan, you have the option of or moving the funds to a new 401k plan offered by your new company or to an individual retirement account (IRA), also known as a rollover.


  • Individuals who want to save for retirement may have the option to invest in a 401(k) or Roth 401(k) plan. Both plans are named for the section of the U.S. income tax code that created them. Both plans offer tax advantages, either now or in the future.
    With a traditional 401(k), you defer income taxes on contributions and earnings. With a Roth 401(k), your contributions are made after taxes and the tax benefit comes later: your earnings may be withdrawn tax-free in retirement.

Traditional 401(K) Plans

  • A traditional 401(k) is an employer-sponsored plan that gives employees a choice of investment options. Employee contributions to a 401(k) plan and any earnings from the investments are tax-deferred. You pay the taxes on contributions and earnings when the savings are withdrawn. As a benefit to employees, some employers will match a portion of an employee’s 401(k) contributions. Income taxes on matching funds also are deferred until savings are withdrawn.

Roth 401(K) Plans

  • An employer-sponsored Roth 401(k) plan is similar to a traditional plan with one major exception. Contributions by employees are not tax-deferred but are made with after-tax dollars. Income earned on the account, from interest, dividends, or capital gains, is tax-free.

401(K) and Roth 401(K) Rules and Regulations

  • The Securities and Exchange Commission does not regulate or oversee retirement plans such as pensions or 401(k) plans.

Reference: SEC