How to Move Money From a 401(k) Into a Roth IRA

Yes, you can roll a 401(k) into a Roth IRA, but you will owe income tax on the money you move

A Roth conversion — moving pre-tax money from a 401(k) into a Roth IRA — is legal and available to most people. The catch is that the IRS treats the money you move as income in the year you move it, so you will owe federal income tax on the full amount. If your 401(k) has $50,000 and you convert it all, you will report $50,000 as taxable income that year. You do not have to convert all of it; you can move part of the balance and leave the rest in the 401(k).

The reason people do this despite the tax bill is that money in a Roth IRA grows tax-free forever, and you can withdraw it tax-free in retirement. A 401(k) requires you to take withdrawals starting at age 73 (as of 2023), and those withdrawals are taxed as income. A Roth has no required withdrawals and no income tax on withdrawals. If you expect to be in a higher tax bracket later, or if you want to leave money to heirs tax-free, a Roth conversion can make sense — but only if you can pay the tax bill without raiding the money you are converting.

Key Takeaways

You can convert a 401(k) to a Roth IRA at any age and with any income level, but you will owe income tax on the full amount you convert in that tax year.
The money must come from your own 401(k); you cannot convert a spouse's 401(k) or an employer plan you do not own.
You have 60 days from the time you receive the money to deposit it into a Roth IRA, or the IRS will treat it as a withdrawal and charge you a 10% penalty if you are under 59½.
If you have other pre-tax IRA money (traditional IRA, SEP IRA, or SIMPLE IRA), the IRS will tax the conversion based on the total of all your pre-tax IRAs, not just the amount you convert.
You can do a conversion once per year, but you cannot undo it after the tax deadline for that year passes.

Which 401(k)s can be converted

You can convert a 401(k) only if you no longer work for the employer that sponsors it. If you still work there, your plan may allow an in-service conversion, but most do not. Once you leave the job, you can convert the balance at any time.

You cannot convert a 401(k) that belongs to someone else — not a spouse's, not a parent's, not a former employer's plan you have not touched in years. The account must be in your name and you must have the legal right to withdraw from it. If you are the beneficiary of a deceased person's 401(k), different rules apply; that is a separate process called a beneficiary conversion, and the tax treatment is different.

How the conversion process works

You contact the 401(k) plan administrator (usually the company that holds the account, like Fidelity, Vanguard, or your employer's benefits department) and ask for a direct rollover to a Roth IRA. You will need to provide the name and account number of the Roth IRA you want the money to go into. The plan administrator sends the money directly to that IRA custodian; it never touches your hands.

This is called a direct rollover and it is the cleanest route. The alternative is an indirect rollover: the plan sends you a check, you have 60 days to deposit it into a Roth IRA, and if you miss that deadline the IRS treats it as a withdrawal. You also cannot do an indirect rollover more than once per 12-month period across all your IRAs, even if you have multiple accounts. A direct rollover has no such limit.

The plan administrator will withhold 20% of the money for federal taxes unless you do a direct rollover. So if your 401(k) has $50,000 and you do an indirect rollover, you receive $40,000 and the plan sends $10,000 to the IRS. You still owe tax on the full $50,000, so you will have to pay the extra $10,000 out of pocket when you file your return, or you will face a shortfall.

The tax bill you will owe

The amount of tax you owe depends on your tax bracket for that year. If you convert $50,000 and you are in the 24% federal tax bracket, you will owe $12,000 in federal tax. State income tax may apply too, depending on where you live. Some states do not tax retirement income; others tax it like regular income.

The conversion also counts as income for that year, which can affect other things: whether you are subject to the net investment income tax (3.8% on certain investment income if your modified adjusted gross income is above a threshold), whether you lose tax credits you were counting on, or whether your Medicare premiums go up. If you are on Medicare, higher income in the year of conversion can increase your Part B and Part D premiums for the following year.

You can spread the tax impact by converting over multiple years instead of all at once. You might convert $10,000 one year, $10,000 the next, and so on. This keeps each year's income lower and may keep you in a lower tax bracket.

The pro-rata rule and why it matters if you have other IRAs

If you have a traditional IRA, SEP IRA, or SIMPLE IRA in addition to the 401(k) you want to convert, the IRS uses a pro-rata rule that affects how much tax you owe. The rule says: the IRS looks at the total balance of all your pre-tax IRAs (not including Roth IRAs) plus the amount you are converting, and taxes the conversion based on what percentage of that total is pre-tax money.

Example: You have a traditional IRA with $100,000 in pre-tax money. You want to convert $50,000 from your 401(k) to a Roth. The IRS treats this as if you are converting $50,000 out of a total pool of $150,000 (the $100,000 traditional IRA plus the $50,000 you are converting). Two-thirds of that pool is pre-tax money, so two-thirds of your $50,000 conversion — about $33,333 — is taxable. The other $16,667 is treated as a return of money you already paid tax on.

This rule can make a conversion much more expensive if you have other pre-tax IRA money. One workaround is to roll the traditional IRA into your 401(k) before you convert, if your 401(k) plan allows it. That removes the traditional IRA from the pro-rata calculation. You should talk to a tax professional before doing this, because the rules are complex and a mistake can be costly.

What happens after the conversion

Once the money is in the Roth IRA, it grows tax-free. You can withdraw the contributions (the money you converted) at any time without tax or penalty. You cannot withdraw the earnings (the growth) until you are 59½ and the account has been open for at least five years. If you withdraw earnings before then, you owe income tax on them plus a 10% penalty.

The five-year rule is per Roth IRA account, not per conversion. If you open a Roth IRA and convert money into it, the five-year clock starts. If you open a second Roth IRA later and convert more money into it, that second account has its own five-year clock. But if you convert into the same Roth IRA multiple times, only one five-year clock applies to the whole account.

You do not have to take withdrawals from a Roth IRA at any age. You can leave the money there for your entire life and pass it to heirs, who will inherit it tax-free (though they will have to take withdrawals over their own lifetimes under current rules).

Undoing a conversion if you change your mind

You can undo a conversion by doing a recharacterization, but only before the tax deadline for the year you converted — usually April 15 of the following year, or October 15 if you file an extension. You contact the Roth IRA custodian and ask them to move the money back to a traditional IRA or 401(k). You will not owe tax on the conversion, and any earnings that happened between the conversion and the recharacterization are also moved back.

Recharacterizations are useful if the market drops after you convert. If you convert $50,000 and it drops to $40,000 before you recharacterize, you can move the $40,000 back and owe tax only on the $40,000, not the original $50,000. You can then convert again later if you want.

Frequently Asked Questions

Do I have to convert my entire 401(k) balance?

No. You can convert part of it and leave the rest in the 401(k) or roll it into a traditional IRA. You might do this to keep your tax bill lower in a single year, or to convert only the portion that makes sense for your situation.

Can I convert a 401(k) if I am still working?

Not usually, unless your plan allows an in-service conversion. Most employer plans do not. Once you leave the job, you can convert. If you are still working but have an old 401(k) from a previous employer, you can convert that one.

What if I do not have enough money to pay the tax bill?

You can pay the tax from other sources — savings, a paycheck, a loan. Do not use money from the conversion itself to pay the tax, because that reduces the amount you are converting and can trigger a 10% penalty if you are under 59½. If you cannot pay the tax, do not convert, or convert a smaller amount.

Will a conversion hurt my Social Security benefits?

A conversion counts as income for that year, which can affect whether your Social Security benefits are taxed. If you are already receiving benefits and your income is close to the threshold, a large conversion might push you over and cause some of your benefits to become taxable. A tax professional can model this before you convert.

Can I convert a 401(k) after I retire?

Yes, as long as you no longer work for the employer that sponsors the plan. You can convert at any age. If you are under 59½, you cannot withdraw from the Roth for five years without penalty, but you can withdraw your contributions anytime.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.