How to Roll 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 rollover from a 401(k) to a Roth IRA is allowed under federal law, but it works differently than rolling into a traditional IRA. When you move pre-tax 401(k) money into a Roth account, the IRS treats it as a conversion. You must report the full amount you convert as taxable income in that year, and you will owe income tax on it at your regular tax rate. This is the main cost of the move, and it happens whether you do the rollover yourself or have your employer handle it.

The reason people do this despite the tax bill is that Roth IRAs have no required withdrawals in retirement, no income limits on contributions once you convert, and all future growth is tax-free. If you expect to be in a higher tax bracket later, or if you want to leave money to heirs tax-free, the upfront tax cost can be worth it. But you need to understand the tax hit before you start the process.

Key Takeaways

You owe federal income tax on the full amount you convert from a 401(k) to a Roth IRA in the year you do the conversion.
Your 401(k) plan administrator can send the money directly to your Roth IRA provider, which avoids the 60-day important date that applies to personal rollovers.
If you receive the check yourself, you have 60 days to deposit it into the Roth IRA or the IRS treats it as a withdrawal and you owe a 10% penalty if you are under 59½.
You cannot undo a Roth conversion after the tax year ends, so calculate your tax bill before you commit.
State income tax may also explore to the conversion, depending on where you live.

The two ways to move the money: direct transfer versus personal rollover

A direct transfer (also called a trustee-to-trustee transfer) is the safest method. You contact your 401(k) plan administrator and ask them to send the money directly to the Roth IRA provider you have chosen. The money never touches your hands. The plan sends it straight to the new account, and there is no 60-day clock. This method is straightforward and removes the risk of missing a important date.

A personal rollover means the plan sends you a check. You then deposit it into your Roth IRA yourself. You have exactly 60 days from the day you receive the check to deposit it. If you miss that important date, the IRS treats the money as a withdrawal, not a rollover. You will owe income tax on it anyway, plus a 10% early withdrawal penalty if you are under 59½. Many people choose the direct transfer specifically to avoid this risk.

If your plan offers it, direct transfer is the better choice. Ask your plan administrator whether they can do a direct Roth conversion rollover. Some plans require you to roll to a traditional IRA first, then convert that to a Roth separately — this adds a step but does not change the tax outcome.

Understanding the tax bill: what you owe and when

The IRS requires you to report the conversion as income on your tax return for the year you do it. If you convert $50,000 from your 401(k) to a Roth IRA in 2024, you add $50,000 to your taxable income for 2024. You then owe federal income tax on that amount at your marginal tax rate — the rate that applies to your highest income bracket that year.

Your tax rate depends on your total income and your filing status. If you are in the 24% federal tax bracket, a $50,000 conversion costs you roughly $12,000 in federal tax. If you are in the 32% bracket, it costs roughly $16,000. State income tax may explore too, depending on your state. Some states do not tax retirement income, but others do.

You do not have to pay the tax from the converted money itself. You can pay it from your regular income or savings. Many people do this because it allows the full converted amount to grow tax-free in the Roth. If you use money from the conversion to pay the tax, less money ends up in the Roth account.

Who can do a Roth conversion and when it makes sense

There are no income limits on Roth conversions. Even if you earn too much to contribute directly to a Roth IRA, you can convert a 401(k) to one. This is one reason conversions are popular for high earners.

A conversion often makes sense if you expect your tax rate to be higher in retirement than it is now, or if you want tax-free growth and no required withdrawals. It also makes sense if you are leaving money to heirs — Roth IRAs pass to beneficiaries tax-free. A conversion makes less sense if you are in a very high tax bracket now and expect to be in a lower one in retirement, because you are paying tax at a high rate to avoid tax at a lower rate later.

Timing matters. If you are between jobs, taking a sabbatical, or having a low-income year, that year might be a good time to convert because your tax bracket is lower. Conversions done in high-income years cost more in taxes.

What happens to your 401(k) after the rollover

Once you roll money out of your 401(k), that money is no longer in the plan. If you still work for the employer that sponsors the plan, you may be able to keep the rest of your 401(k) there. If you have left the job, you usually must roll the remaining balance somewhere — either to an IRA, to a new employer's plan, or take it as a distribution.

The rollover does not affect your ability to contribute to your 401(k) in future years. You can still make regular contributions to your current employer's plan. The conversion is a one-time move of existing money, not a change to how future contributions work.

The pro-rata rule: why it matters if you have a traditional IRA

If you have money in a traditional IRA (not a Roth), the pro-rata rule affects your conversion. The rule says that when you convert a 401(k) to a Roth, the IRS looks at all your traditional IRAs, SEP IRAs, and straightforward IRAs combined. It calculates what percentage of your total IRA money is pre-tax, and you owe tax on that same percentage of the amount you convert.

For example: you have $100,000 in a traditional IRA and $50,000 in a 401(k). You convert the $50,000 401(k) to a Roth. The IRS sees $150,000 in total pre-tax retirement accounts. Two-thirds of that ($100,000 out of $150,000) is pre-tax. So you owe tax on two-thirds of your $50,000 conversion, or about $33,333. This can make conversions much more expensive if you have a large traditional IRA balance.

One way to reduce this tax is to roll your traditional IRA into your new employer's 401(k) plan before you do the conversion, if the plan allows it. This removes the traditional IRA from the pro-rata calculation. Talk to a tax professional before converting if you have both a traditional IRA and a 401(k).

Steps to complete a Roth conversion rollover

First, open a Roth IRA if you do not have one. You can open one at a bank, brokerage, or investment firm. You will need to provide your name, Social Security number, and address.

Second, contact your 401(k) plan administrator and request a direct rollover to your Roth IRA. Give them the name and address of the Roth IRA provider and your account number at that provider. Ask them to label it as a Roth conversion rollover, not a regular rollover. Some plans may require a form; ask what paperwork they need.

Third, the plan will send the money directly to your Roth IRA. This usually takes one to two weeks, though it can take longer depending on the plan and provider.

Fourth, report the conversion on your tax return. You will receive a Form 1099-R from your 401(k) plan showing the amount converted. You will also receive a Form 5498 from your Roth IRA provider. Use these forms to fill out Form 8606 (Nonqualified Distributions of IRAs) when you file your taxes. Your tax software will guide you through this, or a tax professional can help.

Frequently Asked Questions

Can I convert my 401(k) to a Roth IRA if I still work for the company?

Yes, you can convert while still employed, but your plan must allow it. Some plans do not permit in-service conversions. Contact your plan administrator to ask whether your specific plan allows Roth conversions. If it does not, you can wait until you leave the job to do the conversion.

What if I convert and then change my mind?

You cannot undo a Roth conversion after the tax year ends. Once you file your tax return reporting the conversion, it is final. You cannot recharacterize a conversion back to a traditional IRA the way you could in years past. Plan carefully and consider talking to a tax professional before you convert.

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

No. You can convert part of your 401(k) and leave the rest in the plan or roll it to a traditional IRA. You might do this if you want to spread the tax bill across multiple years by converting in chunks, or if you want to keep some money in the 401(k) for other reasons.

What if my 401(k) has employer matching money in it?

You can convert employer matching money just like your own contributions. The entire amount you convert is taxable, regardless of whether it came from your salary deferrals or employer contributions. The tax bill is the same either way.

Will converting to a Roth affect my Social Security benefits?

Roth conversions do not count as earned income, so they do not affect your Social Security benefits directly. However, the conversion increases your taxable income for that year, which can trigger taxation of your Social Security benefits if you are already receiving them. Talk to a tax professional if you are on Social Security and considering a conversion.

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.