• How do rollovers work?

• Can you transfer your 401k to an IRA if you haven't quit your job?

• How do you roll over a 401k to an IRA? What about a Roth IRA?

• Should you roll over your 401k into an IRA?

• Can you roll over an IRA into a 401k at your new job?

How do rollovers work?

A rollover refers to the tax-free transfer of money from one investment to another, usually in the case of 401ks and IRAs. Rolling over your profit-sharing or 401k funds into a rollover IRA when you leave your company is smart because it will keep your investment growing tax-deferred. Once you know you are headed for the exit door, figure out where your money will go. If you want to choose your own investments, open an IRA with a mutual fund family or a discount brokerage to save on commissions. If you need some help, go to a full-service brokerage. You can put mutual funds along with individual stocks, bonds, and other investments in an IRA brokerage account. Ask your accountant, family members, and friends for recommendations on a broker.

The next step is to fill out some paperwork to let the fund family or brokerage know you want to open a rollover IRA account. You sometimes can do it online. You also may need to fill out a distribution form from your company. Indicate that you want a direct rollover to an IRA and name the new trustee of your account. Some funds and brokers will work directly with your company to facilitate the rollover. If you have to nurse the process along yourself, make sure the check is made out to your new account - not to you-even if your company sends the check to you. Otherwise, the company will withhold 20% of your funds, and you may be liable for a 10% early withdrawal penalty. The rollover should be completed within 60 days.

Usually not. "Generally, you can't roll over a 401k plan to a self-directed IRA unless you've been classified as a terminated employee (you've quit, been fired, laid off, etc.). Check your employer's guidelines, or Plan Document, concerning distributions and rollovers for details," suggests Certified Financial Planner professional of the FPA.

Meanwhile there are ways to improve your 401k plan: "If you're not happy with your 401k's fund selections, consider speaking with your human resources department. Employers are finding that increasing the selection of funds is becoming easier, while the costs of administering 401ks are decreasing."

Once you've left your job, as long as you're eligible for an IRA, you can roll over your 401k into a rollover IRA account. Make absolutely sure that you're making a "direct rollover," which means that your former 401k plan's trustee makes the check directly payable to your new IRA's custodian- not to you. Otherwise, you'll be taxed as if you were completely cashing out.

As for Roth IRAs, Certified Financial Planner professional of the FPA says, "Because you can't roll over a 401k directly into a Roth IRA, first roll the 401k into a rollover IRA. Then roll the IRA into a Roth IRA. The drawback is paying the tax on the contributions to the Roth IRA."

It's one of your options when you leave your company. Basically, your choices are to leave your money in your company's plan, roll over your 401(k) into your next employer's 401k or a rollover IRA, or take a distribution. The advantages of a rollover are that your money continues to grow tax-deferred and that you may have more investment choices. Later, you can put it into a new employer's plan if it remains separate from other IRA funds. Keeping your funds with your former employer reduces the hassle for you and may preserve your ability to borrow from your retirement plan. Taking a distribution may be tempting, but it's also very costly. Your former employer must withhold 20% of your funds right off the bat for federal taxes, and you will be charged a 10% penalty for an early withdrawal if you are under 59 1/2. You also will miss out on the years of tax-deferred compounding that would have made your retirement years more comfortable.

You can put funds from a rollover IRA into a 401k if your new company's plan allows it. Essentially, you are rolling over funds that originally came from your previous employer's tax-deferred retirement plan, and they must have been kept separate from other IRA funds. No other kind of IRA can be rolled over into a 401k. Moving funds to a new employer's plan is a good idea when you have plenty of investment choices and you are allowed to borrow money from the account.