Can You Do a Partial Rollover? Rules, Taxes, and the 60-Day Deadline

Yes, you can do a partial rollover. Federal law lets you move all or any portion of a balance from a qualified retirement plan into another eligible retirement account without owing tax on the transferred amount.¹ You pick a dollar amount, roll it into a traditional IRA, Roth IRA, or another employer plan, and leave the rest where it is. There’s no minimum and no maximum. What matters is how the money moves, what type of account it’s coming from, and whether any of it falls into a category the tax code refuses to let you roll.

Which Accounts Qualify and What Can’t Be Rolled Over

The eligible-rollover-distribution rules cover 401(k)s, 403(b)s, governmental 457(b) plans, traditional IRAs, and qualified annuity plans. Money from any of these can move into any other eligible retirement plan.¹

Three kinds of distributions are never eligible, no matter the account:

Required minimum distributions. The portion of any distribution that satisfies your RMD for the year cannot be rolled over.²
Substantially equal periodic payments made over your lifetime or for ten years or more.¹
Hardship distributions from a 401(k) or 403(b).¹

Direct Versus Indirect: The Single Biggest Decision

How the money physically moves has the largest effect on your tax exposure. In a direct rollover, your plan administrator or IRA custodian sends the funds straight to the receiving institution. You never handle a check, and nothing is withheld.

In an indirect rollover, the check is cut to you. If the money is coming from an employer plan like a 401(k), the administrator is required to withhold 20% of the taxable amount for federal income tax before sending you the balance.³ You then have 60 days from the date you received the distribution to deposit the full original amount into an eligible retirement plan.¹

That “full original amount” language is where partial rollovers get expensive. Say you asked for $50,000 and received a check for $40,000 after withholding. To complete a tax-free rollover, you have to deposit $50,000 into the new account within 60 days, meaning you have to come up with the missing $10,000 out of pocket. Deposit only the $40,000 and the withheld $10,000 becomes a taxable distribution. Under 59½, it also carries an additional 10% early withdrawal penalty.⁴ You’ll get the withheld amount back as a credit when you file, but not until then.

For most partial rollovers, direct is the right answer.

The One-Per-Year Rule for IRA-to-IRA Rollovers

If you’re doing an indirect rollover from one IRA to another IRA, you’re limited to one such rollover in any 12-month period across all your IRAs combined.⁵ A partial rollover counts the same as a full one. Take an indirect IRA-to-IRA rollover in March and you can’t do another until the following March.

The rule is narrower than it sounds. It doesn’t apply to direct trustee-to-trustee transfers, rollovers from employer plans into an IRA, rollovers between employer plans, or Roth conversions.³ Using direct transfers between custodians sidesteps the annual cap entirely.

The Pro-Rata Rule When Your IRA Has After-Tax Money

If your traditional IRA holds both deductible and nondeductible contributions, you can’t select which dollars to roll. The tax code treats all your traditional IRAs as one pool when calculating the taxable portion of any distribution.⁵ Every dollar that leaves reflects the overall pre-tax to after-tax ratio.

An example: with $90,000 pre-tax and $10,000 after-tax across all your traditional IRAs, 90% of any distribution is taxable. A $20,000 partial rollover carries $18,000 pre-tax and $2,000 after-tax, no matter which account you pull it from.

Splitting Pre-Tax and After-Tax Money From a 401(k)

Employer plans work differently, and the difference is worth understanding if you’ve made after-tax contributions. Under IRS guidance in effect since 2015, when you take a distribution from an employer plan that includes both pre-tax and after-tax money, you can direct the pre-tax portion into a traditional IRA and the after-tax portion into a Roth IRA.⁶

If a 401(k) holds $80,000 pre-tax and $20,000 in after-tax contributions, the $80,000 can go into a traditional IRA and the $20,000 into a Roth IRA. The Roth side lands tax-free because you already paid tax on those contributions. Any earnings on the after-tax contributions are pre-tax and get allocated to the traditional IRA rollover first.⁶ Tell the plan administrator how you want the split before the direct rollovers are processed.

Under 59½: The Penalty and the Age-55 Exception

Any portion of a partial distribution you don’t roll over is taxable as ordinary income. Under 59½, an additional 10% tax applies to the taxable portion.⁷ On a $50,000 distribution where you roll only $30,000, the $20,000 you keep gets taxed and hit with an extra $2,000 penalty.

Two exceptions matter most for partial rollovers:

Separation from service after age 55. If you leave your employer during or after the year you turn 55, distributions from that employer’s plan escape the 10% penalty. For qualified public safety employees, the age is 50. This exception applies only to the employer plan you’re leaving, not to IRAs.⁴
Other statutory carve-outs, including certain medical expenses, health insurance premiums while unemployed, disability, and qualified domestic relations orders.⁴

Order matters with the age-55 exception. Take some cash penalty-free from the old 401(k) first, then roll the rest to an IRA. Once money lands in the IRA, the age-55 exception no longer covers it.

If You’ve Started Taking RMDs

Once RMDs have started, you have to take the year’s RMD before rolling anything else. RMD amounts can’t be moved into another tax-deferred account.² Roll an RMD by mistake and the IRS treats it as an excess contribution to the receiving account, with a 6% excise tax for each year it stays there.⁸

Sequence it deliberately. Calculate the RMD, take at least that amount (taxed as ordinary income), then request the partial rollover for anything additional. Confirm with the administrator that the RMD isn’t being included in the direct rollover.

Outstanding 401(k) Loans Complicate the Numbers

An unpaid loan against your 401(k) or 403(b) can change what actually leaves the account. When the plan reduces your balance to offset an outstanding loan, the offset counts as a distribution. If the offset happens because you left the job or the plan terminated, it’s a “qualified plan loan offset amount,” and you have until your tax return due date (with extensions) to roll it over.¹

Otherwise the standard 60 days applies. The loan offset and the cash portion are treated as separate distributions for rollover purposes.⁹ If you asked for a $30,000 partial rollover and have a $5,000 outstanding loan that gets offset, you’re tracking two rollover windows and may need $5,000 in outside cash to keep the offset from being taxed.

Inherited Accounts

Your options with an inherited retirement account depend on your relationship to the person who died. A surviving spouse who is the sole beneficiary can roll inherited funds into their own IRA, which keeps normal partial rollover flexibility intact.¹⁰

Non-spouse beneficiaries cannot roll over inherited funds at all. An IRA inherited from a parent, sibling, or anyone other than a spouse generally has to come out on a life-expectancy schedule or under the 10-year rule for deaths in 2020 or later.¹⁰ Attempting a rollover creates excess contributions with recurring penalties.

Can You Do This While Still Working

A common assumption is that you can move part of your 401(k) whenever you want. In most cases, funds only leave an employer plan after a triggering event: leaving the job, reaching 59½, disability, or plan termination. Whether your plan permits in-service distributions is set by the plan document itself. Some plans allow in-service rollovers starting at 59½, some don’t allow them at all, and some layer on additional conditions like years of participation.

Read the summary plan description or call the administrator before assuming a partial rollover is available. This is the most frequent reason the process stalls before it starts.

How to Request a Partial Rollover

The details vary by custodian, but the same pieces of information come up everywhere: the dollar amount, the receiving account number, the receiving institution’s name and mailing address, and for employer plans, the receiving plan’s employer identification number. Bad details can misroute funds or, worse, close the sending account.

Most administrators use a distribution election form. You’ll indicate a partial distribution rather than a full one and choose direct rollover or an indirect check. Marking the wrong option is how people accidentally liquidate an entire account. Many custodians handle this online now, with the same fields; if you’re mailing paperwork, certified mail with return receipt is cheap insurance.

Expect two to four weeks from when the request is processed. The sending institution sells the assets and either wires the funds or issues a check. Watch both accounts to confirm what arrives matches what you requested.

What Shows Up on Your 1099-R

Your former plan administrator issues Form 1099-R to report the distribution. A clean direct rollover shows zero in box 2a (taxable amount).¹¹

When part of a distribution is rolled and part is kept, the administrator must issue two separate Forms 1099-R, one for the rollover portion and one for the taxable portion.¹¹ Check both when they arrive in January. A 1099-R that mislabels a rollover as taxable will trigger an IRS notice if it isn’t corrected on your return.

Missing the 60-Day Deadline

If you took an indirect rollover and couldn’t complete the deposit within 60 days, you may still be able to save it. The IRS lets financial institutions accept a late rollover if you provide a written self-certification that one of several qualifying reasons prevented timely completion.¹²

Qualifying reasons include death or disability, hospitalization or serious illness, incarceration, postal error, foreign country restrictions, plan administrator or custodian errors, and reliance on incorrect information from the plan.¹³ Forgetting, or not having cash to replace the 20% withholding, does not qualify. The certification is submitted to the receiving institution, not to the IRS, and it must be made as soon as the reason preventing the rollover no longer applies. The IRS can still audit and challenge the certification later.

1
Office of the Law Revision Counsel. 26 USC 402 – Taxability of Beneficiary of Employees Trust
2
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
3
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
4
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
5
Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
6
Internal Revenue Service. Guidance on Allocation of After-Tax Amounts to Rollovers Notice 2014-54
7
Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
8
Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs)
9
Federal Register. Rollover Rules for Qualified Plan Loan Offset Amounts
10
Internal Revenue Service. Retirement Topics – Beneficiary
11
Internal Revenue Service. Instructions for Forms 1099-R and 5498
12
Internal Revenue Service. Retirement Plans FAQs Relating to Waivers of the 60-Day Rollover Requirement
13
Internal Revenue Service. Waiver of 60-Day Rollover Requirement Rev. Proc. 2016-47