Rolling over a retirement account can be a smart step in retirement planning. An IRA rollover involves moving funds from one retirement account, such as a 401(k) or TSP, into an IRA. This can improve your control, potentially lower fees, or expand your investment options. However, before you make the move, it’s important to carefully review key factors to ensure the rollover fits your retirement goals and complies with the IRS rules in 2026.

1. Confirm Your Eligibility for an IRA rollover

Not all retirement accounts qualify for direct rollover to an IRA. Generally, rollovers are possible from employer-sponsored plans like 401(k), 403(b), 457 plans, and the Thrift Savings Plan (TSP). Make sure your current account allows rollovers and check if there are any restrictions such as company policies or plan-specific rules.

2. Understand 2026 IRS Contribution and Withdrawal Limits

Knowing the IRS limits helps avoid tax pitfalls post-rollover. For 2026:

  • Employee deferral limit for 401(k), 403(b), 457, and TSP plans is $24,500. Catch-up contributions for those 50 and older are $8,000, and $11,250 catch-up applies to ages 60-63.
  • IRA contribution limit (traditional and Roth combined) is $7,500, with a $1,100 catch-up for those age 50 and older, totaling $8,600.
  • Required Minimum Distributions (RMDs) begin at age 73, or age 75 if born in 1960 or later.

After completing a rollover, your IRA is subject to these limits. Understanding them helps you plan contributions and withdrawals accurately.

3. Review Roth IRA Income Phase-Out Rules If Considering a Roth Conversion

If part of your rollover strategy involves converting funds to a Roth IRA, review the income limits carefully. For 2026, Roth IRA contributions phase out for people with Modified Adjusted Gross Income (MAGI) between $153,000 and $168,000 for singles or heads of household, and between $242,000 and $252,000 for married couples filing jointly. Although conversions are not limited by income, awareness of income thresholds impacts your overall tax planning.

4. Evaluate Fees and Investment Options

One major reason for rolling over into an IRA is access to a wider range of investment choices or lower fees. Before moving your money:

  • Compare expense ratios, administrative fees, and trading commissions in your current account versus the IRA options.
  • Consider the investment lineup: mutual funds, ETFs, bonds, or annuities like fixed indexed annuities (FIAs).
  • Keep in mind FIAs offer index-linked growth with a 0% floor on losses, optional lifetime income riders, and can fit well if you’re planning for steady retirement income over a longer horizon. They do come with caps, participation rates, and potential rider fees.
  • Multi-year guaranteed annuities (MYGAs) are also an option, offering a fixed rate and simplicity, often better suited for shorter time frames.

5. Understand Distribution Rules, Taxes, and Penalties

Rollovers can be direct (trustee-to-trustee) or indirect (you withdraw and redeposit). Direct rollovers avoid mandatory tax withholding and possible early withdrawal penalties. Indirect rollovers require careful timing to complete within 60 days to avoid taxes and penalties.

If you roll over pre-tax funds to a Roth IRA (Roth conversion), you’ll owe income tax for the converted amount, but future qualified withdrawals can be tax-free.

6. Check Your Employer Plan’s Features

Some employer plans offer lifetime income options, loans, or unique benefits you might lose by rolling over. Confirm if benefits such as loans or company stock holdings are accessible in the IRA after rollover, or if you must manage them separately.

7. Confirm Required Minimum Distributions (RMD) Timing

If you are age 73 or older (or 75 if born in 1960 or later), RMDs must be taken from your IRA regardless of rollover status. Note that 401(k) plan RMDs may differ slightly. You cannot roll over an RMD amount, so plan distributions accordingly to avoid tax penalties.

8. Coordinate with Your Financial and Tax Advisers

IRA Rollovers can have complex tax and retirement planning consequences. It is wise to discuss your plan with a trusted tax professional or retirement adviser. They can help tailor a strategy that fits your personal financial situation, including projected income, tax brackets, and retirement goals.

Common FAQs About IRA Rollovers

Q: Can I roll over my 401(k) to a Roth IRA directly?

A: Yes, this is called a Roth conversion. Taxes must be paid on pre-tax amounts rolled over, but future qualified Roth withdrawals are tax-free. Make sure you understand the tax implications before proceeding.

Q: How long do I have to complete an indirect rollover?

A: You must deposit the withdrawn funds to your IRA within 60 days to avoid treating the withdrawal as taxable income and potential penalties.

Q: Are annuities allowed inside an IRA rollover?

A: Yes, certain annuities, including fixed indexed annuities (FIAs), can be held within IRAs. Remember, annuities are insurance products with features like index-linked growth subject to caps and participation rates.

Q: Will rolling over my retirement account affect my catch-up contributions?

A: No. Catch-up contributions are annual limits set by the IRS and not affected by rollover activity.

Summary: Use This IRA Rollover Checklist Before You Move

  • Verify rollover eligibility and plan rules.
  • Understand 2026 IRS contribution, catch-up, and required minimum distribution limits.
  • Review income phase-outs if considering Roth conversions.
  • Evaluate fees and investment options, including annuities like FIAs versus MYGAs.
  • Plan for taxes and avoid penalties by choosing direct rollovers when possible.
  • Assess employer plan benefits you might lose.
  • Confirm RMD timing and rules.
  • Speak with financial or tax advisers for personalized guidance.

Following this checklist when completing an IRA rollover can help you make informed decisions aligned with your retirement planning goals. For more educational insights and retirement solutions, explore FixedIRAs.com.

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