Before You Roll Over Your 401(k): The 6 Options You Need to Know For 2025
Rolling over your old 401(k) or 403(b)?
One wrong move could quietly cost you thousands in unnecessary taxes and penalties — especially in California’s high-tax environment.
In this educational session, Christian Cordoba, founder of California Retirement Advisors, CERTIFIED FINANCIAL PLANNER®, and member of Ed Slott’s Elite IRA Advisor Group℠ since 2007, breaks down the 6retirement rollover options that every retiree should know — and the mistakes to avoid before you move a dollar.
You’ll Discover
- The 6 rollover options you must know by law (only one is typically mentioned)
- When the age-55 rule lets you access funds without a 10% penalty
- The difference between direct and indirect rollovers — and why one mistake can blow up your taxes
- How to use Roth conversions and RMD timing to cut lifetime taxes
- Why after-tax contributions could be your secret weapon for tax-free income
Click the video below to watch:
What You’ll Learn (Without the Jargon)
Rolling over your old 401(k) isn’t just paperwork — it’s a financial turning point. Most people retire only once, and these decisions often involve your largest lump sum of money. Here’s a summary of the 6 rollover & tax options that are covered inside the presentation.
1. Leave Your Money in Your Old Plan
When it can make sense:
- Keeps the age-55 separation rule so you can withdraw penalty-free if you left that employer in or after the year you turned 55 (50 for certain public safety workers).
- Offers stronger creditor protection under ERISA and may have lower institutional fees.
What to watch:
- Investment choices are limited, service is minimal, and beneficiary rules can be stricter than IRAs.
- Once rolled to an IRA, you lose the age-55 advantage forever.
2. Roll It to Your New Employer Plan
Potential advantages:
- Maintains ERISA protection.
- May allow loan access from the plan (not possible with IRAs).
- Simplifies accounts if you’ve worked in multiple places.
Drawbacks:
- You reset your “triggering event,” meaning you can’t tap the money again until you leave the new employer.
- Fewer investment options and potential service delays.
3. Roll It to an IRA (Account)
Why most people do this:
- Unlimited investment choices and more personalized advice.
- Easier paper trail and simplified RMD coordination —you can take required distributions from any IRA rather than each plan separately.
- Better estate and beneficiary control.
Keep in mind:
- Rolling to an IRA loses the age-55 exception.
- IRAs start RMDs at age 73 (unless converted to Roth).
- Slightly weaker creditor protection outside ERISA.
4. Take a Lump-Sum Distribution
Why it’s rarely wise: Taking the money outright triggers ordinary income tax on the entire balance and can push you into higher brackets and Medicare surcharges.
When it might help: If you own company stock in your plan that has grown significantly, the Net Unrealized Appreciation (NUA) rule can let you pay long-term capital gains rates on the growth instead of ordinary income rates — a rare tax break few advisors mention.
5. Convert to a Roth IRA
The big benefits:
- Tax-free growth and withdrawals for life (no RMDs).
- Can help avoid future tax bracket creep and Medicare (IRMAA) surcharges.
- Roth assets can protect a surviving spouse from higher “single filer” tax rates.
What to watch:
- You owe tax on the amount converted in that year (plan for bracket control and NIIT thresholds).
- Best practice: convert gradually over several years and start the five-year clock now (even a small account counts).
6. Do an In-Plan Roth 401(k) Conversion
Advantages:
- Keeps money inside your employer plan while locking in future tax-free growth.
- As of 2024, Roth 401(k)s no longer have RMDs.
Trade-offs:
- Higher current-year taxes because you’re deferring less pre-tax income.
- Fewer investment and beneficiary options than a Roth IRA.
Common Mistakes to Avoid
- Accidental tax traps: Doing an indirect rollover (check made to you) creates a 20% withholding and a 60-day deadline — miss it and it’s taxable.
- Losing the age-55 rule: Rolling too soon can add unnecessary penalties.
- Overlooking after-tax contributions: These can often be moved directly to a Roth IRA for tax-free growth.
- Forgetting RMD coordination: Multiple IRAs give you flexibility on which account to pull from — plans don’t.
- Outdated beneficiaries: Your IRA form —not your will — controls who gets your money.
Simple Next Steps
- Decide if you’ll need money before 59½. If so, keep some in the old plan for the age-55 bridge.
- Map your tax brackets ahead of time. Avoid pushing into IRMAA or NIIT zones.
- Start a Roth now. Even $100 starts your five-year clock.
- Review beneficiary forms and trust language.
- Always use a direct trustee-to-trustee transfer. Never take possession of the check.
Why This Matters for Californians
California’s high taxes and long retirements make every decision count more. A mis-timed rollover, missed withholding, or Roth mistake can quietly erase tens of thousands in future income.
At California Retirement Advisors, we specialize in helping successful Californians turn their retirement accounts into coordinated, tax-efficient income plans. Through our proprietary CRAve Life Advisory Process™ — enhanced by The Bucket Plan®, our Tax Management Journey, and Family Estate Organizer — we integrate taxes, income, investments, and legacy into one clear plan.
Watching the video is powerful — but doing nothing after watching can be costly.
Your Next Step: A 20-minute Q&A intro call
When you schedule your complimentary 20-minute Q&A with one of our licensed advisors — each trained in Ed Slott’s advanced IRA strategies — you’ll get:
- Clear answers on your rollover and tax options
- A review of where you might be overpaying Uncle Sam
- Guidance on your next best steps — tailored to your California reality
If you’re ready to get clarity on your rollover, taxes, and next best steps, you can schedule your complimentary 20-minute Q&A below.
Best Regards,
California Retirement Advisors