401k Rollover Rules: Why 60-Day Deadlines Matter

401k Rollover Rules: Why 60-Day Deadlines Matter
Susan received a $200,000 401k distribution check when she left her job. She had 60 days to deposit the funds into an IRA to maintain tax-deferred status. During this period, her mother became ill and Susan missed the deadline while caregiving.
What happened on day 61:
Entire $200,000 became taxable as ordinary income
Large distribution pushed Susan into higher tax brackets
Total tax liability: approximately $40,000
No exceptions available for personal circumstances
Key 401k rollover education:
Direct rollover: Funds transfer directly between institutions - no deadlines or tax consequences
60-day rollover: You receive a check and must deposit within 60 days - strict deadline with limited exceptions
Professional guidance: Always request direct rollovers when possible. This eliminates timing risk and ensures your retirement funds maintain tax-deferred status without depending on meeting deadlines during potentially stressful life transitions.
The 60-day rollover rule is enforced strictly by the IRS, and personal circumstances typically don't qualify for extensions.
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What rollover questions do you have? Share them below.
More 401k topics:
Direct rollover vs. 60-day rollover comparison
401k withdrawal rules and penalties
IRA rollover contribution limits and rules
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