Can Stocks Be Rolled Over Into an IRA?

Can Stocks Be Rolled Over into an IRA?

can stocks be rolled over into an ira? Short answer: yes. This guide explains who can roll stocks into an IRA, the common methods (direct, indirect, and in‑kind), tax consequences including Roth conversions, the special treatment of employer/company stock and Net Unrealized Appreciation (NUA), practical steps, and when you may want to keep assets in a workplace plan. Readers will learn what to ask their plan administrator, what paperwork and forms to expect, and when to consult a tax advisor.

As of January 15, 2025, according to MarketWatch reporting, many retirees keep funds in employer plans for reasons such as low fees, creditor protection, or the age‑55 penalty exception; a 2024 GAO report showed nearly 60% of terminated participants who rolled over their savings did not know they could leave savings in their old plan.

Overview of Rollovers

A rollover is the transfer of retirement assets from one qualified plan or IRA to another qualified plan or IRA without triggering a taxable distribution. The primary purposes are to preserve tax‑deferred status, consolidate multiple retirement accounts for simpler management, access a wider set of investment choices, or take advantage of different fee structures or custodian services.

Typical scenarios that prompt rollovers include: leaving an employer, consolidating several old 401(k) or 403(b) accounts into a single IRA, or converting pre‑tax balances to a Roth account. Two common transfer methods are trustee‑to‑trustee (direct) rollovers and indirect rollovers that rely on the 60‑day rule. In most direct rollovers, assets move from one custodian directly to another with no withholding or immediate tax consequences, preserving the tax‑deferred status.

Types of Rollovers and Transfer Methods

Direct rollover (trustee-to-trustee)

A direct rollover (trustee‑to‑trustee) is the cleanest method. The distributing plan sends assets directly to the receiving IRA custodian or plan. There is no taxable distribution, no mandatory withholding, and no 60‑day time clock for the account owner. For securities held in the plan, a direct rollover can often be done either as an in‑kind transfer or as cash after liquidation, depending on plan rules and receiving custodian capabilities.

Benefits of direct rollovers:

• Avoids the 60‑day risk and potential penalties.
• No mandatory federal withholding.
• Simpler tax reporting — the distribution is coded and reported as a rollover.

When you instruct a direct rollover, confirm the exact payee and account details required by the distributing plan (see Practical Considerations section for common check payee wording and broker transfer nuances).

Indirect rollover (60-day rule)

An indirect rollover occurs when the plan distributes assets to you personally and you then redeposit the funds into an IRA within 60 days. That redeposit avoids treating the distribution as taxable income. Important points:

• A plan that issues a distribution to you typically withholds 20% for federal taxes on pre‑tax amounts. To avoid being taxed on the withheld portion, you must replace the withheld amount from other funds when completing the rollover within 60 days.
• If you fail to redeposit the full taxable portion within 60 days, the portion not rolled becomes taxable income and may also be subject to the 10% early distribution penalty if you are under age 59½ (unless another exception applies).
• The 60‑day rule is strictly enforced; exceptions exist but are limited and typically require IRS relief.

Indirect rollovers are useful when timing or custody restrictions make a direct rollover impractical, but they carry administrative and tax risks.

In-kind rollovers (transferring securities vs. selling)

An in‑kind rollover moves the actual securities (shares) from the distributing plan account to the receiving IRA rather than liquidating to cash. Key aspects:

• Publicly traded stocks, ETFs, bonds, and many mutual funds can often be transferred in‑kind if the receiving custodian supports them.
• In‑kind transfers preserve the number of shares, trade dates, and realized/unrealized gain characteristics, but cost basis and lot tracking must be accurately recorded by both custodians.
• Some plans or custodians do not permit in‑kind transfers for certain securities; they may require liquidation to cash first.

If your goal is to maintain the same positions without triggering a taxable event, request an in‑kind trustee‑to‑trustee transfer and confirm the receiving custodian can hold those securities. When in doubt, sell in plan and transfer cash, but be aware that selling may realize gains inside a non‑taxed account only if done improperly — typically sales inside a tax‑deferred plan do not create immediate tax, but recordkeeping matters for taxable conversions.

Which Assets Can Be Rolled Into an IRA

Common eligible assets:

• Cash and cash equivalents.
• Publicly traded stocks and bonds.
• Exchange‑traded funds (ETFs).
• Mutual funds (plan or retail share class acceptance varies).
• Most employer retirement plan investments, subject to plan restrictions.

Plan‑specific limits: individual employer plans can restrict transfers, disallow certain non‑standard securities, or impose windows for distributions. Employer/company stock held in a retirement plan is generally transferable, but it triggers special tax considerations (Net Unrealized Appreciation — NUA) that can make a taxable distribution to a brokerage account more tax‑efficient than rolling the shares into an IRA.

Tax Treatment When Rolling into an IRA

Traditional IRA rollovers (pre-tax)

When you roll pre‑tax assets (for example, a traditional 401(k)) into a Traditional IRA via a direct rollover, the tax‑deferred status continues. You do not pay income tax at the time of the rollover. Future withdrawals from the Traditional IRA will be taxed as ordinary income in the year distributed, subject to required minimum distribution rules and early withdrawal penalties where applicable.

Rolling to a Roth IRA (conversion)

If you convert pre‑tax retirement assets to a Roth IRA, the conversion is a taxable event in the year you perform it. You pay ordinary income tax on the converted amount (the pre‑tax principal and any accrued earnings). Future qualified distributions from the Roth IRA are generally tax‑free, but be mindful of the five‑year rule for qualified Roth distributions and how the conversion affects your current tax bracket. Large conversions can create substantial tax liability.

Reporting and forms

Key IRS forms and reporting items:

• Form 1099‑R: Issued by the distributing plan when assets are distributed. It indicates the amount distributed and codes whether the distribution was rolled over.
• Form 5498: Issued by the receiving IRA custodian to report rollover contributions received by the IRA.

Even in a direct rollover, you will receive a Form 1099‑R; it should show the rollover code so the distribution is not treated as taxable income. Keep records of all rollover paperwork and statements to substantiate non‑taxable rollovers when filing taxes.

Employer (Company) Stock and Net Unrealized Appreciation (NUA)

What is NUA?

Net Unrealized Appreciation (NUA) is the difference between the cost basis of employer/company stock when it was contributed to a retirement plan and its market value at the time of distribution from the plan. NUA applies only to employer stock held in an employer retirement plan (e.g., a 401(k)).

NUA tax rules and potential advantages

The NUA strategy can be tax‑efficient for concentrated employer stock holdings:

• If you take a lump‑sum distribution of company stock from your employer plan and deposit the stock into a taxable brokerage account (not an IRA), you pay ordinary income tax only on the cost basis (the amount that was originally contributed or purchased inside the plan).
• The NUA portion (the appreciation) is not taxed at the time of distribution; when you later sell the stock in the taxable account, the NUA portion is taxed at long‑term capital gains rates regardless of how long you hold the stock after distribution.
• Any future appreciation after distribution is treated as a separate capital gain or loss based on the sale price relative to the market value at distribution.

This split treatment — ordinary income tax on basis and capital gains tax on the NUA portion — can be favorable compared with rolling the stock into an IRA, where all future distributions would be taxed as ordinary income.

Requirements and limitations for using NUA

To qualify for NUA treatment, several conditions typically must be met:

• The distribution must be a lump‑sum distribution (often defined as a one‑time distribution of the entire account following separation from service or a qualifying event described in the plan). Many plans require the entire plan balance be distributed in one taxable distribution to trigger the NUA opportunity.
• The employer must allow distribution of company stock; plan rules differ.
• You must transfer the employer stock to a taxable brokerage account rather than rolling that stock into an IRA.

Pitfalls and practical constraints:

• You will owe ordinary income tax on the cost basis immediately upon distribution; this can create a significant near‑term tax bill.
• The NUA election is irrevocable and complex; recordkeeping and proper tax reporting are essential.
• If the distribution does not meet lump‑sum or plan requirements, NUA treatment may not be available.

When rolling employer stock to an IRA may be disadvantageous

If you roll employer stock into an IRA, you forfeit NUA tax treatment. The entire future distributions from that IRA (including gains that were NUA) will be taxed as ordinary income when withdrawn. For highly appreciated company stock, this loss of favorable capital gains treatment can materially increase lifetime tax liability, especially if your ordinary income tax rate will be higher than long‑term capital gains rates when you sell the stock.

Practical Considerations and Plan Rules

Plan documents and custodian rules often determine what is possible in practice:

• Some plans prohibit in‑kind transfers or require liquidation of certain investments before distribution.
• Plans may charge fees for distributions or transfers; small balances (for example, under $7,000 in many plans) can be automatically distributed by the plan, sometimes in cash, which can trigger withholding and taxes.
• Custodial compatibility: not all IRA custodians accept all security types for in‑kind transfers. Broker‑to‑broker transfer processes (such as Automated Customer Account Transfer Service procedures) have specific instructions and timelines.
• Check payee wording: some plans issue distribution checks payable to the receiving IRA custodian for the benefit of (F/B/O) the participant; incorrect payee or endorsement can delay processing.
• Timing: trustee‑to‑trustee transfers often take 2–4 weeks, depending on the custodian and asset type. Stocks and ETFs usually transfer smoothly, while proprietary funds or certain mutual fund share classes may require liquidation.

Always read the plan’s Summary Plan Description (SPD) and ask the plan administrator about permitted distribution types, required forms, and timing.

Pros and Cons of Rolling Stocks into an IRA

Benefits:

• Broader investment choices and flexibility in an IRA (retail mutual fund share classes, alternative custodial services, and trading tools).
• Consolidation of multiple old employer plans into a single account simplifies recordkeeping and required minimum distribution (RMD) calculations.
• Potentially lower fees or access to preferred account features at the receiving custodian.
• Easier account management for those who change employers frequently.

Drawbacks:

• You may lose NUA tax advantages for employer company stock if you roll it into an IRA.
• IRAs may have different creditor protections compared to employer plans, depending on state law.
• Certain IRA assets cannot be rolled back into employer plans in the future.
• Rolling to a Roth triggers immediate income tax on pre‑tax amounts.

Step-by-Step Process to Roll Stocks into an IRA

Checklist to execute a rollover smoothly:

1. Decide on target account: Traditional IRA or Roth IRA (if Roth, plan for tax on conversion).
2. Review your employer plan’s SPD and talk to the plan administrator to confirm allowed distribution types, whether in‑kind transfers are allowed, and any fees or timing requirements.
3. Open the receiving IRA with a custodian that accepts your securities in kind (if desired). Provide account numbers and custodian transfer instructions.
4. Choose method: direct trustee‑to‑trustee rollover is generally preferred to reduce tax and administrative risk.
5. Provide exact payee information and any required forms to the plan administrator (including FBO wording if issuing checks).
6. Confirm whether the transfer will be in‑kind or liquidated to cash. If in‑kind, verify the receiving custodian will accept and correctly record cost basis and lot information.
7. Track the transfer and confirm receipt. Check forms: you should receive a Form 1099‑R from the distributing plan and later a Form 5498 from the receiving IRA showing rollover receipt.
8. Keep copies of statements and rollover confirmations for tax reporting. If converting to Roth, plan for tax payment on the converted amount.

Examples and Numerical Illustration

A short illustrative comparison highlights tax timing differences.

Example (simplified): You own employer stock in a 401(k) with a cost basis of $20,000 and a current market value of $100,000 (NUA = $80,000).

A) Use NUA strategy: take a lump‑sum distribution and transfer the stock to a taxable brokerage account.

• Immediate tax: ordinary income tax on $20,000 (the basis).
• Later sale: the $80,000 NUA is taxed at long‑term capital gains rates when you sell the stock, potentially lowering tax relative to ordinary income rates.

B) Roll the stock into a Traditional IRA:

• No immediate tax at rollover.
• Future withdrawals: the entire $100,000 (basis + appreciation) will be taxed as ordinary income when distributed from the IRA.

This illustration shows why, for highly appreciated employer stock, NUA can be materially advantageous. Exact outcomes depend on your tax brackets, timing of sales, and other factors — consult a tax professional for personalized calculations.

Special Cases and Frequently Asked Questions

Can inherited retirement plan stock be rolled into my IRA?

Short answer: inherited retirement accounts follow distinct rules. In general, you cannot roll an inherited retirement plan directly into your own IRA. Rules vary by the type of beneficiary (spouse vs. nonspouse) and plan terms. Always consult the plan administrator and tax guidance when handling inherited retirement assets.

Can I roll a Roth 401(k) or Roth account into a Roth IRA?

Yes — rolling Roth employer accounts into a Roth IRA typically preserves the account’s tax treatment. However, be mindful of the five‑taxable‑year rule for Roth distributions and whether the receiving Roth IRA meets required holding periods for qualified distributions.

Can I roll partial holdings (only the stock) to take NUA?

Partial distributions may be allowed by some plans, but to use NUA you usually need a qualifying lump‑sum distribution as defined by the plan and IRS rules. Often that requires distribution of the entire plan balance following separation from service. Check plan specifics carefully; partial transfers might disqualify the NUA election.

Compliance, Timing, and Potential IRS Relief

The 60‑day rule for indirect rollovers is strict, but the IRS may waive the deadline in limited circumstances (for example, disasters or other hardships) if you apply and demonstrate reasonable cause. Document all communications and keep records of mailing dates, forms, and custodian acknowledgements. Trustee‑to‑trustee direct rollovers eliminate the 60‑day risk and are the recommended approach when possible.

Federal withholding rules: distributions from employer plans that are paid directly to participants commonly have 20% mandatory federal withholding on taxable amounts unless directly rolled to another qualified plan or IRA.

Where to Get Help and Further Reading

When deciding whether to roll stocks into an IRA — especially employer company stock subject to NUA rules or when contemplating a Roth conversion — consult the following resources and professionals:

• Your plan administrator or HR department for plan documents and distribution procedures.
• The receiving IRA custodian for transfer and in‑kind acceptance policies. For web3 wallets or custody needs, consider Bitget Wallet and Bitget’s custodial solutions where appropriate.
• A qualified tax advisor or CPA for tax calculations, NUA analysis, and Roth conversion planning.
• Authoritative regulatory sources: IRS rollover guidance and NUA regulations.
• Custodian educational materials from major custodians and unbiased personal finance educational sites for how rollovers are implemented.

References and External Guidance

• IRS publications and rollover guidance: rules on rollovers, indirect rollovers (60‑day rule), conversions, and reporting forms.
• As of January 15, 2025, according to MarketWatch reporting summarizing retirement options and a 2024 GAO report, nearly 60% of terminated participants who rolled over their savings did not know they could leave funds in their old plan; plans may force small balances under $7,000 to be distributed; mandatory federal withholding on distributions commonly occurs at 20% for taxable distributions.
• Custodian and educational resources include rollover guidance from major custodians and independent finance education sites for examples and calculators.

Note: This article is informational and neutral. It does not provide specific investment advice. For decisions involving company stock, conversions, or complex tax outcomes, seek personalized advice from qualified tax and financial professionals.

Next Steps and How Bitget Can Help

If you are evaluating where to move retirement assets or how to hold transferred securities, consider these next steps:

• Request your plan’s SPD and distribution forms from the plan administrator.
• Talk to your tax advisor about NUA and Roth conversion consequences.
• Open a receiving IRA and confirm in‑kind acceptance if you prefer to preserve positions.

For custody, trading, and web3 wallet needs related to post‑rollover investment activity, Bitget and Bitget Wallet offer custodial services and educational resources to help you manage transferred securities and tokens. Explore Bitget’s resources to compare fees, available investment types, and custody protections.

Further reading: consult IRS rollover and NUA guidance, plan documents, and custodian rollover instructions before acting.

Article prepared to help readers answer: "can stocks be rolled over into an ira". For complex cases involving employer stock or large conversions, consult plan administrators and tax professionals. Keep records of all distributions and transfers.