401(k) Rollover Guidance in O'Fallon, MO: Your Four Options Compared

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Quick answer: When you leave an employer, you generally have four choices for your 401(k): leave it where it is, move it to your new employer's plan, roll it into an IRA, or cash it out. A direct rollover to another plan or an IRA is generally not taxed and has no tax withheld. Cashing out generally is taxed and, before age 59½, may add a 10% additional tax. A rollover is not automatically the right answer. We are fiduciaries: our job is to help you compare the choices for your situation, including the choice to leave the money where it is.

Why this decision deserves a second look

A 401(k) is often the largest account people own after their home. You usually face this decision at a busy moment: a new job, a layoff, or retirement. The paperwork can feel routine, but the choice affects your investment options, your taxes, when you can take money out without a penalty, and what you leave to your family.

Three things are worth knowing at the start:

• The plan must tell you your options. Your plan administrator must give you a written explanation of your rollover options, including your right to have the money transferred directly to another plan or an IRA (IRS).
• You usually have time. In many cases you can leave the account in the plan while you compare, unless your balance is small. If your balance is under $5,000, your employer may require you to move it (IRS).
• How the money moves matters as much as where it goes. A direct rollover and a check made out to you are taxed very differently.

Your four options

Sources for this table: IRS "Retirement topics: Termination of employment" and Investor.gov "Switching Jobs."

How a rollover works

Direct rollover

You ask your plan administrator to send the money straight to the new plan or the IRA. The administrator may issue a check made payable to your new account rather than to you. No tax is withheld from a direct rollover (IRS).

60-day rollover (the check comes to you)

If the plan pays the money to you, you can still roll it over by depositing it in an IRA or another plan within 60 days. The catch is withholding. A distribution from a retirement plan that is paid to you is subject to mandatory withholding of 20%, even if you plan to roll it over later. To roll over the full amount, you must make up the withheld amount from other money (IRS Topic 413).

Illustration of how the rules work, based on the IRS's own example, not an investment result: you receive a $10,000 eligible rollover distribution and $2,000 is withheld. If you roll over only the $8,000 you received, the $2,000 is reported as taxable income, and if you are under 59½ it may also be subject to the 10% additional tax. If you add $2,000 from other money and roll over the full $10,000, the entire $10,000 is a nontaxable rollover.

If you miss the 60-day deadline, the IRS has waiver and self-certification paths in limited situations. They are not automatic, so a direct rollover is generally the cleaner route.

What cannot be rolled over

The IRS lists distributions that are not eligible for a rollover, including required minimum distributions, hardship distributions, certain periodic payments made over your life expectancy or 10 years or more, loans treated as distributions, and dividends on employer stock (IRS Topic 413). If you have an outstanding plan loan, ask the plan what happens to it when you leave. A loan that is offset when you leave may still be rolled over until the due date, including extensions, of the tax return for the year of the offset (IRS Topic 413).

Questions to ask before you move the money

These are the questions we work through with you. None of them has a single right answer for everyone.

• Investment choices. What does each choice offer, and does it fit your plan? The IRS lists the plan's investment options and its fees among the reasons you might leave the money where it is (IRS).
• Expenses. What does each account cost to hold? Compare the old plan, the new plan, and an IRA on the same basis.
• Services. Do you want help with withdrawals, tax planning, and beneficiary reviews, or do you want a simple account with fewer features?
• Access to the money before 59½. Distributions from a qualified employer plan after you separate from service in or after the year you turn 55 are an exception to the 10% additional tax. That exception is listed for plans other than IRAs, so it generally does not carry over to an IRA (IRS Topic 558). Whether this matters depends on your age and whether you expect to need the money early.
• Required minimum distributions. Required minimum distributions generally begin at age 73 or 75, depending on your birth year. If you are still working for the employer that sponsors the plan and you are not a 5% owner, the plan may let you delay required distributions from that plan until you retire. That delay does not apply to IRAs (IRS).
• Employer stock. If your account holds your employer's stock, a special tax rule on net unrealized appreciation may apply. See "Special situations" below.
• Taxes. Rolling pre-tax money into a Roth IRA is taxable in the year of the rollover (IRS). That is a decision to model with your CPA before you act.
• Beneficiaries. Whichever account holds the money, the beneficiary form controls who receives it. We review that form with you. See our page on estate planning coordination.

Special situations

Employer stock and net unrealized appreciation

If a lump-sum distribution includes employer stock, the net unrealized appreciation, which is the growth above the plan's cost basis, is generally not taxed until you sell the shares, unless you elect to include it in income in the year of the distribution (IRS Topic 412 and Publication 575). Rolling the stock into an IRA gives up that treatment. The rules for a qualifying lump-sum distribution are technical. If you hold employer stock, talk to your CPA before you move anything.

Leaving at 55 or older

The age-55 exception described above can matter if you plan to retire early and will need to draw from the account before 59½. Compare the choices before you roll over, because the exception is tied to the plan and not the IRA.

Still working when required distributions would begin

If your plan allows it, delaying required distributions until retirement can be a reason to keep money in a current employer's plan. This applies only to the plan you are working under, not to an old plan or an IRA (IRS).

Roth 401(k) money

Designated Roth accounts in a 401(k) and Roth IRAs are not subject to required distributions while the owner is alive (IRS). Ask us how the two types of Roth accounts are handled in a rollover and whether any holding-period rules affect you.

How we help

We are a fiduciary investment adviser. When we help with a rollover decision, we:

1. Collect the facts. The plan's rollover notice, the investment lineup, your statements, your age, and your plans for work and retirement.
2. Compare the options side by side. Leaving it, moving to the new plan, an IRA, and cashing out, with the trade-offs in plain language.
3. Coordinate with your CPA. With your permission, we work with Jeannie Renaud, CPA, at Renaud Tax & Accounting LLC (a separate CPA firm in our office), or the CPA you already use, on the tax side of any Roth rollover or stock distribution. We do not give tax advice.
4. Handle the mechanics if you move forward. We help you request a direct rollover so the money goes from the plan to the new account, and we confirm that it arrived.
5. Revisit as life changes. A new job, a retirement date, or a change in the law is a reason to look again.

A conflict of interest you should know about. A rollover can lead to an advisory relationship with us. That gives us an incentive to recommend one. Our Form ADV Part 2A and Form CRS describe our services and our conflicts of interest. You are free to leave your money where it is, move it to a new plan, or roll it to an IRA at another firm.

A short checklist for your first meeting

• The plan's most recent statement and the rollover notice or distribution paperwork
• A list of the plan's investment choices
• Your new employer's plan summary, if you have started a new job
• Any outstanding plan loan and its balance
• Whether the account holds employer stock
• Your beneficiary forms
• Your expected retirement date and any income you plan to draw before then
• Your most recent tax return, if you want us to work with your CPA

Who this is for, and who it is not

A good fit: workers and retirees in O'Fallon, St. Charles County, and the St. Louis metro who have an old employer plan, are leaving a job, or are about to retire, and want the options laid out clearly before they choose. Probably not the right fit: you have already decided where the money is going and only need the transfer form from your plan administrator. We will tell you if that is the case.

Serving O'Fallon, St. Charles County, and the St. Louis metro

Our office is at 2112 Bryan Valley Commercial Drive in O'Fallon. We work with households across O'Fallon, St. Charles, Lake Saint Louis, Wentzville, and St. Peters, and meet in person or virtually. If you are also weighing your Medicare premiums at retirement, see our IRMAA planning guide. If you own a business, see retirement planning for business owners.

Who you will work with

Matthew J. Renaud Sr., ChFC®, has been in financial services since 1998. His son, Matthew Renaud Jr., AWMA®, is an Investment Advisor Representative at the firm. Meet the team.

FAQ

Should I roll over my 401(k) when I leave a job?

Not always. You generally have four choices: leave the money in the old plan, roll it into a new employer's plan if that plan accepts rollovers, roll it into an IRA, or cash it out. Each has trade-offs in investment choices, expenses, services, taxes, and access to the money. We help you compare them for your situation, and we will say so if leaving the money where it is makes the most sense.

Is a 401(k) rollover taxable?

A direct rollover to another retirement plan or a traditional IRA generally is not taxed when it is done, and no tax is withheld. Rolling pre-tax money into a Roth IRA is taxable in the year of the rollover. If you take the money as cash instead, the taxable part is generally included in your income, and before age 59½ a 10% additional tax may apply unless an exception fits.

What is the difference between a direct rollover and a 60-day rollover?

In a direct rollover, the plan sends the money straight to the new plan or IRA, and no tax is withheld. In a 60-day rollover, the plan pays the money to you and you have 60 days to deposit it in another plan or an IRA. A payment from a retirement plan to you is subject to 20% mandatory withholding, so you must add that amount from other money to roll over the full distribution.

Why did my old plan withhold 20%?

Federal rules require mandatory 20% income tax withholding on a taxable eligible rollover distribution that is paid to you, even if you intend to roll it over later. Withholding does not apply to a direct rollover. If you want to defer tax on the full amount after a check was issued to you, you must replace the withheld amount from other funds within 60 days.

Can I leave my 401(k) with my old employer?

Often, yes. If your balance is under $5,000, your employer may require you to move it. If the account is between $1,000 and $5,000 and you do not make an election, the plan may move it into an IRA in your name. If it is $1,000 or less, the plan may pay it to you, generally less 20% withholding. Your plan documents or administrator can tell you which rules apply.

Which distributions can't be rolled over?

Examples listed by the IRS include required minimum distributions, hardship distributions, certain series of substantially equal periodic payments, loans treated as distributions, and dividends on employer stock. Ask your plan administrator whether any part of your distribution is ineligible before you request a rollover.

Can I take money from my 401(k) at 55 without the 10% additional tax?

If you separate from service with your employer in or after the year you reach 55, distributions from that employer's plan are an exception to the 10% additional tax on early distributions. The IRS lists that exception for plans other than IRAs, so it generally does not apply after the money is rolled into an IRA. The distribution is still taxed as income. Talk with your CPA before relying on it.

What is net unrealized appreciation (NUA)?

If a lump-sum distribution from your plan includes your employer's stock, the net unrealized appreciation, meaning the growth above the plan's cost basis, is generally not taxed until you sell the shares, unless you elect to include it in income in the year you receive them. The rules are technical, and rolling the stock into an IRA gives up this treatment. Review it with your CPA first.

Do I have to work with Renaud & Company to roll over my 401(k)?

No. You can request a direct rollover to an IRA at any firm, move the money to a new employer's plan, or leave it where it is. A rollover can lead to an advisory relationship with us, which is a conflict of interest described in our Form ADV Part 2A and Form CRS.

Next step: Book a 45-minute coordination meeting at (636) 240-5055 or info@renaudco.com. If we are not the right fit, we will say so.

Renaud & Company Registered Investment Advisors · 2112 Bryan Valley Commercial Drive, O'Fallon, MO 63366 · (636) 240-5055 · Mon–Thu 8:00 AM–4:30 PM, Fri 8:00 AM–3:00 PM (extended hours in tax season)

Important disclosures: Renaud & Company, LLC is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training. We are fiduciaries when we provide investment advice. Renaud & Company, LLC and its advisors do not provide tax or legal advice. Renaud Tax & Accounting LLC is a separate CPA firm; tax preparation and accounting services are provided by that firm under a separate engagement. Our Form ADV Part 2A and Form CRS describe our services and conflicts of interest and are available at adviserinfo.sec.gov or on request. This page is educational and is not individualized investment, tax, or legal advice. Rules are as published by the IRS and other agencies as of October 28, 2026 and can change. There is no guarantee that any plan or strategy will achieve any particular result.