A rollover moves money from one retirement account to another, most often from a former employer's 401(k) into an IRA, without paying tax on the move.
The clean way is a direct rollover, or a trustee-to-trustee transfer between IRAs: the money goes straight from one custodian to the other, nothing is withheld, and there is no limit on how many you do.
An indirect rollover, where the check is paid to you, has traps. You have 60 days to deposit it or it becomes a taxable distribution, plus a 10% early-distribution tax if you are under 59½. A workplace plan must withhold 20% for taxes, so rolling over the full amount means making up that 20% from other money. And you can do only one IRA-to-IRA indirect rollover in any 12-month period, counting all your IRAs together.
Rolling to an IRA isn't automatically right. If you leave a job in or after the year you turn 55, withdrawals from that employer's plan avoid the 10% early-distribution tax, which an IRA doesn't allow. Company stock in the plan may qualify for NUA treatment that a rollover would forfeit. And an advisor who bills on assets earns more when the money moves to them.
How to check
Ask any advisor recommending a rollover to compare, in writing, the plan's fees and investment options with what they propose, including their own fee on the rolled-over money.
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