Moving Money From a 401(k) to a Roth IRA: What You Need to Know

Yes, you can move a 401(k) to a Roth IRA, but you'll owe taxes on the amount you convert

A rollover from a 401(k) to a Roth IRA is allowed, but it works differently than rolling a 401(k) into a traditional IRA. When you move pre-tax money from a 401(k) into a Roth IRA, the IRS treats that as a conversion. You pay income tax on the full amount you convert in the year you do it — that's the trade-off for getting tax-free growth and withdrawals later.

The process itself is straightforward: you contact your 401(k) plan administrator, request a distribution, and direct it to a Roth IRA you've opened. The money moves directly from one account to the other. You don't touch the cash, so there's no 60-day important date like there is with some rollovers. But the tax bill arrives when you file your return that year.

Key Takeaways

You can roll a 401(k) into a Roth IRA, but you must pay income tax on the amount converted in that tax year.
A direct rollover from your 401(k) plan to a Roth IRA avoids the 60-day rule and withholding complications.
You can only convert money that is yours — employer matching contributions follow the same rules as your own contributions.
If your 401(k) holds both pre-tax and after-tax money, the conversion is taxed based on the total balance across all your IRAs, not just the amount you move.
You can convert at any time, even if you're still working, as long as your plan allows in-service distributions.

How a 401(k) to Roth conversion actually works

When you convert a 401(k) to a Roth IRA, you're asking your 401(k) plan to send the money directly to your Roth IRA custodian. This is called a direct rollover. You fill out a form with your 401(k) plan, specify the amount, and provide your Roth IRA account details. The plan sends the money straight to the Roth IRA — you never see it.

The IRS counts this as a taxable conversion. On your tax return that year, you report the amount converted as income. If you converted $50,000, you add $50,000 to your taxable income for that year. Your tax bill depends on your overall income and tax bracket. This is why many people convert in years when their income is lower, or spread conversions over multiple years.

You don't have to wait until you leave your job to convert. Many 401(k) plans allow in-service distributions, which means you can move money while you're still employed. Check with your plan administrator to see if yours does.

The tax bill you'll owe on a conversion

The tax you owe depends on how much you convert and what your income is that year. If you convert $30,000 and you're in the 22% federal tax bracket, you'll owe roughly $6,600 in federal tax — though your actual bill depends on your state taxes and other income. Some people set aside money from the conversion itself to pay the tax bill, while others pay it from a separate account.

There's an important rule called the pro-rata rule that affects how much of your conversion is taxed. If you have multiple IRAs (traditional, SEP, or straightforward) in addition to the 401(k), the IRS looks at the total balance across all of them. If you have $100,000 in a traditional IRA and $50,000 in the 401(k) you want to convert, the IRS treats the conversion as if 67% of it came from pre-tax money. You can't cherry-pick just the after-tax portion to avoid taxes. This rule catches many people by surprise.

If your 401(k) contains both pre-tax contributions (your employer's match, for example) and after-tax contributions (money you put in after-tax), only the after-tax portion converts tax-free. The pre-tax portion is taxed as income.

When you can convert and when you can't

You can convert a 401(k) to a Roth IRA at almost any time, with one main exception: if your plan doesn't allow in-service distributions, you have to wait until you leave the job. Once you separate from your employer, you can roll the 401(k) over to a Roth IRA whenever you want.

There is no income limit on conversions. Unlike Roth IRA contributions, which have income limits that phase out your ability to contribute directly, conversions are open to anyone. This is why high-income earners often use conversions as a way to get money into a Roth.

You can convert as much or as little as you want in a single year, and you can do multiple conversions in different years. Some people convert a portion one year and the rest the next year to spread out the tax hit.

What happens to employer match and vesting

If your 401(k) includes employer matching contributions, those can be rolled over to a Roth IRA just like your own contributions. However, if the match hasn't fully vested — meaning you haven't earned the right to keep it yet — you may not be able to roll it over. Check your plan's vesting schedule. Once money is vested, it's yours and can be converted.

Some plans also hold company stock or restricted shares. If your 401(k) includes these, rolling them to a Roth IRA converts them to cash (or you can request them transferred as shares). Speak with your plan administrator about how they handle company stock in rollovers.

The difference between a rollover and a conversion

A rollover typically means moving money from one retirement account to another of the same type — like a 401(k) to a traditional IRA. A conversion means moving money from a pre-tax account (like a 401(k) or traditional IRA) to a Roth IRA, which triggers a tax bill.

If you roll your 401(k) to a traditional IRA instead of a Roth, you don't owe taxes at the time of the rollover. The money stays pre-tax and grows tax-deferred. You only pay taxes when you withdraw it in retirement. A Roth conversion is the opposite: you pay taxes now so the money grows tax-free and you owe nothing when you withdraw it later.

Some people do both: they roll a 401(k) to a traditional IRA first, then convert part of it to a Roth in a later year when their income is lower. This gives them flexibility in managing the tax bill.

Steps to convert your 401(k) to a Roth IRA

First, open a Roth IRA if you don't already have one. You can open one at any bank, brokerage, or investment firm — Fidelity, Vanguard, Charles Schwab, and many others offer them. You'll need your Social Security number and basic personal information.

Next, contact your 401(k) plan administrator (usually your employer's benefits or HR department) and ask for a direct rollover form. Tell them you want to roll money to a Roth IRA and provide your new Roth IRA account number and the custodian's contact information. Specify the amount you want to convert — you can convert all of it or just part of it.

The plan will send the money directly to your Roth IRA. This usually takes one to two weeks. Once it arrives, the money is in your Roth IRA and you can invest it however you want. Then, when you file your tax return that year, report the conversion as income on your return. Many people work with a tax professional to make sure they report it correctly.

Frequently Asked Questions

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

No. You can convert part of your 401(k) and leave the rest in the plan, or roll the rest to a traditional IRA. Some people convert in chunks over several years to spread out the tax bill. Your plan administrator can help you specify exactly how much to move.

What if I'm still working — can I convert while employed?

Yes, if your plan allows in-service distributions. Many plans do, but not all. Ask your HR or benefits department whether your 401(k) permits in-service rollovers to a Roth IRA. If it doesn't, you'll have to wait until you leave the job.

Can I undo a conversion if I change my mind?

You used to be able to reverse a conversion (called a recharacterization), but that option ended in 2018. Once you convert, the conversion is permanent. You still owe the tax on it even if the account value drops later.

Will converting affect my Social Security or Medicare?

A conversion increases your taxable income for that year, which could affect your Medicare premiums if your income crosses certain thresholds. It may also affect Social Security taxation if you're already receiving benefits. Talk to a tax professional about your specific situation.

What if my 401(k) has both pre-tax and after-tax money?

The pro-rata rule applies. The IRS looks at your total balance across all IRAs and the 401(k), and taxes the conversion proportionally. If 80% of your total is pre-tax, then 80% of the conversion is taxed as income. You can't convert only the after-tax portion to avoid taxes.

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.