Rollovers · 6 min read
Direct Rollover vs. 60-Day Rollover
Both methods can move retirement money. Understanding the steps can help the transfer go smoothly and preserve its tax-advantaged status.
The difference is who receives the money first
With a direct rollover, eligible money is generally sent from the current retirement plan to another eligible plan or IRA. With a 60-day rollover, the distribution is paid to you and you deposit eligible money into another retirement account within the allowed period.
Why a direct rollover may make the process easier
- The full eligible amount can continue working in a tax-advantaged retirement account.
- Mandatory 20% federal withholding generally does not apply.
- There is generally no need to replace the withheld amount using personal funds.
- It reduces the risk of missing the 60-day deadline and creating an unintended taxable distribution.
- With a properly completed direct rollover, taxes on eligible pre-tax funds are generally deferred until the money is withdrawn.
If payment is made to you
An eligible workplace-plan distribution paid to you may have federal income tax withheld. To roll over the full eligible amount, you may need to replace the withheld portion using other money and complete the deposit within the required time.
Questions to ask before starting
- Is this money eligible for a rollover?
- Can the receiving account accept this type of money?
- Can the transfer be completed directly?
- How should a check be made payable?
- How will the new strategy support protection, growth, access, or income?
The plain-language takeaway
A correctly completed rollover can help keep retirement money working toward future goals. Before money moves, it helps to have someone explain the steps, the timing, and the questions to ask.