Rolling a 401k into an IRA

Key Takeaways

• IRAs offer more flexibility than 401(k)s for selective withdrawals and tax withholding—you can choose which assets to sell rather than being forced into pro rata withdrawals, and you can withhold both federal and state taxes
• Only IRAs allow qualified charitable distributions (QCDs) at age 70+, and only IRAs let you build an income ladder with individual bonds, CDs, or Treasury bills that mature on your timeline
• Some 401(k)s restrict withdrawal frequency (quarterly only) or lack state tax withholding options—check your specific plan before deciding, as larger providers typically offer more flexibility
• Don't overlook unique 401(k) investment options like stable value funds or guaranteed income contracts (GICs) that may offer better yields than retail IRA alternatives—these could justify keeping money in your plan
• If you have multiple accounts scattered across different institutions, consolidating to one IRA simplifies beneficiary updates, address changes, and required minimum distribution calculations; however, a single 401(k) plan may not warrant rolling over for simplicity alone