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How to Roll Over Your 401(k) to an IRA: The $6,000 Withholding Trap Most People Walk Into

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Did you just leave a job and get a check from your old 401(k) — for less money than your balance showed? That missing 20% is mandatory federal withholding, and getting it back into your IRA is on you. Rolling a 401(k) into an IRA is one of the most common moves after a job change. Done the right way, it costs nothing in tax. Done the wrong way, a $30,000 balance quietly turns into a $6,000 tax problem — plus a penalty if you are under 59½. This guide covers the trap, the safe route, and two mistakes most rollover guides never mention. The $6,000 Trap: What Happens When the Check Comes to You If the plan pays you directly, the IRS requires 20% withholding — even if you plan to roll every dollar over. This is called an indirect rollover. Your plan sends the distribution to you instead of to your IRA, and the law forces the plan to hold back 20% of the taxable amount for federal income tax before you see a cent. On a $30,000 balance, that is $6,000 withheld and a $24,000 check in you...
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401(k) Employer Match: How to Calculate 50% Up to 6% With Worked Examples

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A "50% up to 6%" 401(k) match means your employer adds 50 cents for every dollar you contribute — but only on the first 6% of your salary. Earn $80,000 and contribute 6% ($4,800), and your employer puts in $2,400 a year. That is the entire formula. The part people get wrong is what happens around the edges: contribute less than 6% and the match shrinks with it, contribute more and the match does not grow, and the match may not be fully yours until a vesting schedule runs its course. The two numbers inside the formula Every match formula has a rate and a cap. The rate (50%) is how many cents the employer adds per dollar you contribute. The cap (6% of salary) is the slice of your pay the employer will match against. A frequent mix-up: "50% up to 6%" does not mean the employer adds 50% of your salary, and it does not mean it adds 6% of your salary. It means 50% of your contributions, on contributions up to 6% of your salary. Capture the full match and the employe...
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No Employer Match? 401(k) or Roth IRA First — and Why the Order Flips

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Your job offers a 401(k) but no employer match, and you have $500 a month to save for retirement. Where does the first dollar go? Without a match, the Roth IRA usually goes first — until you save more than $7,500 a year. With a match, the order is settled: take the free money first. Our guide to retirement accounts covers that order, and it still holds — a match is the closest thing to a guaranteed return in investing. Without one, the two accounts compete on four things: how much room each one gives you, when you pay tax, what the funds cost, and how easily you can reach the money. This guide works through each one with 2026 numbers, and ends with a five-question decision rule. The Capacity Gap: $7,500 vs $24,500 The Roth IRA holds $7,500 a year in 2026. The 401(k) holds $24,500 — more than three times as much. That gap decides the order for most people before tax brackets or fund fees enter the picture. Save $500 a month — $6,000 a year — and the Roth IRA can hold every dolla...
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What Happens to Your 401(k) When You Quit Your Job? The $7,000 Rule Most People Miss

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You just quit your job, and your 401(k) is still sitting with your old employer. What happens to it now? Nothing happens to it automatically — your money stays invested, but you now have four choices, and the wrong one can cost you 30% or more of your balance. Your own contributions are always 100% yours. The employer match depends on vesting. And the rules that decide what you keep — a $7,000 balance threshold, a 20% withholding trap, and a deadline on any outstanding loan — are the parts most guides skip. This guide works through each one with real dollar numbers, using a $30,000 balance as the running example. What You Actually Own When You Leave Every dollar you contributed from your own paycheck is yours, no matter when you leave. The employer match is the part that may not be. Employer contributions vest — become permanently yours — on a schedule your plan sets. Federal law caps how slow that schedule can be, and plans can only be faster, never slower. The two legal maximums...
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