Common 401(k) rollover mistakes

Seven avoidable errors people make when moving an old 401(k), from checks made out to the wrong payee to money left sitting in cash.

5 min read · Reviewed November 2026

Most rollovers are routine. The problems that do come up tend to be the same few, and nearly all of them can be avoided by slowing down and asking a question before the money moves.

1. Having the check made payable to you

When a plan pays a distribution to you personally, it must withhold 20% for federal income tax, even if you intend to roll the money over. A direct rollover, where the payment goes to the new plan or IRA, is not subject to that withholding (IRS).

2. Missing the 60-day deadline

If you receive the money yourself, you generally have 60 days to deposit it into another plan or IRA. After that, the amount is generally treated as a taxable distribution and may also be subject to the 10% additional tax on early distributions. The IRS may waive the deadline in certain situations, but that is not something to plan around.

3. Rolling over only the amount you received

Because 20% was withheld, the check you receive is smaller than your distribution. If you deposit only the check, the withheld portion counts as a distribution that was not rolled over. To roll over the full amount, you have to make up the difference from other funds within the 60 days.

4. Mixing up pre-tax and Roth money

Pre-tax 401(k) money rolled into a traditional IRA generally stays tax-deferred. The same money rolled into a Roth IRA is included in your income for the year. Some accounts hold both pre-tax and Roth balances, and each part needs to go to the right type of account. The IRS rollover chart shows which combinations are allowed.

5. Forgetting an outstanding plan loan

If you leave a job with a 401(k) loan still outstanding, the plan may reduce your account by the unpaid balance. That amount, called a loan offset, is generally treated as a distribution unless you roll it over. For a qualified plan loan offset, the IRS allows until your tax return due date, including extensions, for the year of the offset to complete the rollover (IRS Topic 413). Ask the plan how your loan will be handled before you request a rollover. More on plan loans is available from the IRS.

6. Moving company stock without checking the tax rules

Employer stock held inside a 401(k) may qualify for special tax treatment when it is distributed as part of a lump-sum distribution (IRS Topic 412). Rolling the shares into an IRA may give up that treatment. If your plan holds company stock, it is worth asking a tax professional before you move it.

7. Leaving the money in cash afterward

A rollover often arrives in the new account as cash. It is not invested until you choose investments. People sometimes discover months or years later that their rollover was never invested. After the transfer, log in, confirm the full amount arrived, and make your investment selections.

Two smaller things to remember

The age-55 rule does not follow you to an IRA. The exception to the 10% additional tax for people who leave a job during or after the year they turn 55 applies to employer plans, not IRAs (IRS).
Update your details. Name a beneficiary on the new account and make sure both the old plan and the new provider have your current address.