Can I Roll Over my 401(k) to a Roth IRA?

Written by Andrea Coombes
Edited by Carolyn Kimball
Fact-checked by Dayana Yochim

March 14, 2024

Short answer: Yes, you absolutely can do a rollover of a 401(k) to a Roth IRA.

Longer answer: You really want to understand the ramifications of rolling a 401(k) to a Roth, because taxes:

• If the money in that 401(k) was money you contributed “pre-tax” — that is, you’ve never paid taxes on that money — then you will owe income tax in the year you roll that money to a Roth IRA.
• If the money in that 401(k) is in a Roth account — that is, you paid income tax on that money in the year it was contributed — then rolling over to a Roth IRA is easy peasy and no tax will be due on money you contributed to a Roth account. (Keep in mind that any employer match might have gone into a traditional 401(k) rather than the Roth, in which case you will owe income tax on that money if you roll it over.)

Can I roll over 401(k) money if I'm still working at the company?

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If you still work at the company that offers you the 401(k) and you’re interested in rolling that money over to an IRA, then you need to find out if your company allows an “in-service rollover.” Not all companies do.

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» Read more: Roth IRA vs. traditional IRA

Taxes now or later?

If you want to avoid a tax bill in the year you do the rollover, then roll pre-tax 401(k) money into a traditional IRA, rather than a Roth IRA.

That pushes your tax bill out into the future, when you start withdrawing this money in retirement. At that point, you’ll owe income tax on the money you withdraw.

But, maybe a tax bill sooner rather than later makes sense. Even though moving untaxed 401(k) money into a Roth IRA means a tax bill in the year you do the rollover, it may make sense to do so if:

• You can afford the tax bill now, ideally using savings you have set aside or current income. That is, you do not need to tap into your retirement savings to pay the tax bill, because, if you’re like most of us, you’re definitely going to need that money in retirement.
• You believe that your tax bracket now is lower than it will be later. If that’s the case, then you’re reducing your overall tax bill by paying taxes now.
• You just really love the idea of building up your Roth assets, because having a stash of money that won’t ever be taxed again (assuming you don’t make early withdrawals) can be a pretty amazing feeling. (For the opposite effect, subtract income taxes from your current pre-tax retirement savings. It’s not great.)

Rollovers can be smart

Big picture: Doing a rollover from an old workplace plan like a 401(k) or 403(b) can be a great way to take control of your money, because moving your money to an IRA can make it easier to manage your expenses. Here’s how:

• Potentially finding lower-cost investments at your IRA broker. Reducing costs on investments will depend on how good your old company plan is — some offer fantastically low investments. Many of them don’t. (You want to compare expense ratios on the mutual funds in your plan. Go to each mutual fund’s details page to see the expense ratio. A number like 0.05% is great, but anything lower than 0.5% is good.) (Here are the best IRA brokers according to our sister site, StockBrokers.com.)
• Avoiding any fees that your old company plan might charge ex-employees for administrative purposes. For example, I have an old 401(k) from a former job still sitting at that employer’s 401(k) company. I really need to roll it over — not least because they charge me a fee of about $37 a year. Not a huge amount, but these things add up.

But if your old 401(k) offers super cheap investment options and doesn’t charge fees, it might make sense to let your monestockby sit. Read more: Retirement Accounts Guide: The Best Tools to Save.

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