Definition
Moving retirement money between accounts, typically an old 401(k) into an IRA or a new employer's plan. Always request a direct rollover; taking the money as a check risks taxes and penalties.
Why it matters
Job changes are where retirement money gets lost or cashed out. A direct rollover keeps decades of compounding intact; a cashed check can cost taxes, penalties, and the balance's entire future.
Example
Leaving a job with $40,000 in the 401(k), a worker requests a direct rollover to an IRA: the money moves custodian-to-custodian, untaxed. Cashing out instead could lose over $10,000 to taxes and penalties, plus all future growth.
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.