What Is an In-Kind Rollover? Definition, Process, Pros & Cons

Introduction to In-Kind Rollovers

Most investors know they can move money from one tax-advantaged retirement account to another, but many assume they must sell all the investments inside the old plan first. That is not always the case. An in-kind rollover allows you to transfer the actual securities—such as mutual funds, exchange-traded funds (ETFs), stocks, and bonds—directly into a new retirement account without liquidating them. Understanding how this works can help you avoid unnecessary trading costs, remain fully invested during the transfer period, and preserve tax efficiency.

Definition of an In-Kind Rollover

An in-kind rollover is the process of moving assets "as is" from one qualified retirement savings vehicle to another. Instead of converting the holdings to cash, the custodian electronically re-registers the ownership of each security in the name of the new account. Because the transaction stays within the tax-advantaged universe—think 401(k) to an IRA, or one IRA provider to another—no taxes or penalties are triggered, provided the rollover meets Internal Revenue Service (IRS) rules.

How an In-Kind Rollover Works

The mechanics are straightforward, but they differ slightly depending on whether you perform a direct trustee-to-trustee transfer or an indirect 60-day rollover:

Direct transfer

Your new brokerage or IRA provider requests the assets directly from the old custodian. The securities — and their original cost basis information — move over electronically. You never touch the funds, so there is no mandatory 20% withholding, and the IRS considers it a non-reportable event.

Indirect 60-day rollover

The old plan cuts you a distribution check made payable to you. You must then deposit the assets (or an exact cash equivalent) into another qualified account within 60 days. If you want to stay invested, you must instruct the receiving broker to repurchase the same securities. Because you took possession, federal law requires the plan administrator to withhold 20% for taxes, and you can only do this type of rollover once every 12 months.

Eligible Accounts and Assets

In-kind rollovers are possible between many qualified plans: traditional 401(k)s, 403(b)s, governmental 457 plans, SEP-IRAs, SIMPLE IRAs (after the two-year rule), and Roth designated accounts. However, the destination account must accept the specific securities. For example, proprietary mutual funds inside an employer plan may not be available on an open-architecture IRA platform. Likewise, annuity contracts, stable-value funds, and limited partnership interests often cannot move in-kind and must be liquidated first.

Step-by-Step Guide to Completing an In-Kind Rollover

1. Inventory your holdings

Generate a detailed statement from the current plan and note fund tickers, share classes, and any restrictions.

2. Confirm compatibility

Ask the receiving custodian whether each security can be transferred in-kind. If a fund or share class is unavailable, decide whether to sell it or convert it to a transferable share class before initiating the rollover.

3. Open the receiving account

Complete all new account paperwork and indicate that you wish to execute a direct rollover. Provide a recent statement to speed up asset mapping.

4. Authorize the transfer

Sign the transfer form (often called an ACAT form in brokerage language) and include a voided check or medallion signature guarantee if required. Your new custodian will send the instructions to the existing plan.

5. Monitor progress

Transfers typically take 5–15 business days. During that window, you cannot trade the assets being moved, but you remain fully invested, so you do not miss potential market gains.

6. Verify completion

Once the transfer settles, review the new account to ensure share counts and cost basis match your records. Keep statements from both custodians for tax documentation.

Advantages of Rolling Over In Kind

No forced liquidation: You avoid selling positions that may generate redemption fees or poor execution prices.

Continuous market exposure: Staying invested helps you sidestep the risk of missing a market upswing during the rollover gap.

Lower transaction costs: There is no need to pay commissions or bid-ask spreads on selling and repurchasing identical positions.

Simplified recordkeeping: Original purchase dates and cost basis transfer automatically, which is especially valuable for assets held a long time.

Tax neutrality: Because the assets never leave the shelter of a qualified plan, you do not create a taxable event.

Potential Drawbacks and Limitations

Despite the benefits, in-kind rollovers are not always ideal. Some employer plans restrict rollovers until you separate from service or reach age 59½. Proprietary share classes may need to convert to higher-expense retail classes, increasing costs. In addition, certain custodian platforms charge transfer-out fees per position, so moving a fragmented portfolio can get pricey. Finally, if you intend to overhaul your asset allocation anyway, liquidating and starting fresh in the new IRA may be simpler.

Common Mistakes to Avoid

Missing the 60-day deadline: If you choose an indirect rollover and fail to redeposit the funds in time, the entire distribution becomes taxable income, and you may owe a 10% early-withdrawal penalty.

Violating the one-per-year rule: The IRS allows only one indirect IRA-to-IRA rollover within any 12-month period, regardless of how many individual IRAs you own.

Ignoring plan fees: Make sure the advantages of the new account—wider investment menu, lower expenses, or better service—outweigh any termination or transfer costs.

Overlooking beneficiary designations: Rollovers are a convenient time to review and update beneficiaries, especially after life changes such as marriage or the birth of a child.

Frequently Asked Questions

Can I roll over company stock in kind?

Yes, but you may lose the ability to use the Net Unrealized Appreciation (NUA) tax strategy, which can tax long-term gains at favorable rates. Consult a tax advisor before moving employer stock.

Will my required minimum distributions (RMDs) move too?

No. RMDs must be taken before you roll over assets. Any untaken RMD amount is ineligible for rollover and must be distributed first.

Is there a limit on how much I can roll over in kind?

No. You can transfer the entire account balance or only selected positions, subject to plan rules and receiving custodian acceptance.

Conclusion

An in-kind rollover is a powerful yet underutilized tool for investors seeking a seamless transition between retirement accounts. By transferring your existing securities directly, you stay invested, reduce costs, and preserve your portfolio’s historical data. Before initiating the process, confirm that your holdings are eligible, weigh any fees, and decide whether your investment strategy still serves your long-term goals. With proper planning, an in-kind rollover can help keep your retirement savings on track while maximizing tax efficiency and flexibility.