IRA stands for individual retirement account, meaning a retirement account you fully own and control. A rollover just means you’re “rolling” money into the account from elsewhere, like an old employer’s 401(k) plan. This can help you save more for retirement if you want while keeping your savings’ tax-deferred status.

If the money from your 401(k) plan goes directly into your new IRA, you won’t owe any taxes. This is called a direct rollover. Rolling from your employer plan serviced by Principal to an IRA with Principal is an example of a direct rollover. If the money is sent to you first, you generally have 60 days to move it into another retirement account. If you miss that deadline, the distribution will be taxable and you may also be subject to an early withdrawal penalty.

The time it takes to complete a rollover can vary. Rollovers typically take 2-4 weeks to complete. However, some rollovers may be completed sooner, while others—especially those involving paper checks or additional verification—may take longer. Contact your plan's provider to better understand time frames.

There are several reasons people may choose to move their 401(k) into an IRA:

• More investment options: IRAs usually offer more choices, such as stocks, bonds, mutual funds, and ETFs. In a 401(k), your employer determines which investments are available to you.
• Possibly lower administrative fees: IRAs often have lower administrative fees than 401(k) plans. Some 401(k)s also charge a fee each time you take money out. When considering an IRA be sure to take into consideration the investment fees and expenses compared to those of the 401(k) plan.
• Greater control: You choose where to keep your IRA and how to invest your money since it's no longer tied to the decisions of your former employer.
• Easier to manage: You can combine several old 401(k)s into one IRA, which can make it easier to track your savings and possibly reduce account maintenance costs, and help you see a clearer picture of your progress toward retirement.

Yes, in some cases, it may make sense to leave your money in your 401(k):

• Stronger legal protections: 401(k) plans often have better protection from creditors and lawsuits than IRAs.
• Penalty-free withdrawals at age 55: If you leave your job in the year you turn 55 or older, you can take money out of your 401(k) without a penalty. With an IRA, you usually must wait until age 59½, unless you meet special requirements.
• Possibly lower fees: Some 401(k) plans may offer lower-cost investment options than certain IRAs, depending on the provider.

Yes. After your rollover, you can continue to contribute to your IRA, as long as you meet the IRS rules.

• Traditional IRA: You can contribute if you have earned income. There is no income limit, but the IRS does set a yearly dollar limit.
• Roth IRA: These have income limits. If your income is too high, you may not be able to contribute directly.

Yes, you can withdraw money from your IRA, but there are important rules to understand:

• Traditional IRA: You can take out money without a penalty starting at age 59½. The IRS requires you to start withdrawing money by age 73. If you withdraw early, there may be a 10% penalty, unless you qualify for certain exceptions.
• Roth IRA: You can take out your contributions (the money you put in) at any time, without a penalty. You can withdraw your earnings tax- and penalty-free once you reach age 59½ and have had the account for at least five years. You can also withdraw money penalty-free at any age if you qualify for certain exceptions. These exceptions are the same as those for Traditional IRA. Unlike traditional IRAs, Roth IRAs do not require minimum distributions at any age.