401(k) Rollover Guide for Tech Employees

The average tech employee changes jobs every 2–3 years. Each time, you leave behind a 401(k) at an old employer — and the decision you make about that money has compounding consequences. This guide covers the four options, the mechanics of each, and the two decisions that matter most for tech workers: whether to roll to an IRA or your new employer's plan, and what the rollover means for your backdoor Roth strategy.

Your four options when leaving a job

Options 1 and 2 are both valid for most tech workers. Option 3 is fine temporarily but creates admin overhead. Option 4 is almost always wrong — and especially bad when you're in a high-income year with large RSU vests pushing you into the 37% bracket.

Direct vs. indirect rollover: avoid the 20% withholding trap

How you move the money matters as much as where you move it.

Direct rollover (trustee-to-trustee): Your old plan sends the money directly to the new plan or IRA. You never touch it. No taxes withheld. No deadline pressure.

Indirect rollover: The old plan sends you a check. Here's the trap: if you're rolling from an employer plan (like a 401(k)), the plan is required to withhold 20% for federal income tax — even if you fully intend to roll it over.¹ To complete a tax-free rollover, you must deposit the full pre-withholding amount into the new account within 60 days, making up the withheld 20% from other funds. Miss the 60-day window, and the whole distribution is taxable income plus a 10% early withdrawal penalty.

If you've already received a check (indirect rollover), you have 60 days from receipt — not mailing date — to deposit the full amount including the withheld 20%. The one-per-year IRA limit applies to IRA-to-IRA indirect rollovers, not to rollovers from employer plans.¹

Roll to IRA vs. new employer 401(k): the tech-worker tradeoff

Both are tax-free. Both preserve your retirement savings. The right answer depends on your specific situation:

The backdoor Roth problem — why this rollover decision really matters

This is the most important tech-specific angle, and most general financial advice doesn't cover it well.

If your income exceeds $168,000 (single) or $252,000 (married filing jointly) in 2026, you can't contribute directly to a Roth IRA. The workaround — the backdoor Roth — involves contributing $7,500 non-deductible to a traditional IRA, then converting immediately to a Roth IRA, tax-free.³

The problem: if you roll your old 401(k) into a traditional IRA, that creates a large pre-tax balance. The IRS's pro-rata rule then treats your conversion as partially taxable — proportional to the pre-tax fraction of all your IRA money.

Example: you roll a $150,000 401(k) into a traditional rollover IRA. Now you contribute $7,500 non-deductible for the backdoor Roth. Total traditional IRA pool: $157,500. Your non-deductible fraction: 4.8%. Result: only 4.8% of your $7,500 conversion is tax-free — the rest (~$7,140) is taxable income at your marginal rate (32–37% for most senior tech workers).

To check if your new employer's plan accepts incoming rollovers: log into the 401(k) portal (Fidelity NetBenefits, Vanguard, Schwab, etc.) or call the plan line and ask: "Does this plan accept incoming rollovers from a prior employer's 401(k)?" Most large-tech-company plans do. Some startup and small-company plans do not.

Roth conversion opportunity during a gap year

If you're between jobs — whether voluntarily (a sabbatical, FIRE partial stop) or involuntarily (a layoff) — your income may be substantially lower than in a normal W-2 year. That's an opportunity to do a Roth conversion at lower tax rates.

Example: you leave a $350K total comp FAANG job in March. Your W-2 income for the year is ~$90K (three months of base + ESPP/RSU that vested before departure). In a normal year you're in the 32–37% bracket. This year you might have room in the 22% or 24% bracket to convert $50K–$100K of pre-tax 401(k) or IRA funds into a Roth IRA — permanently sheltering that amount from future taxes.

The tradeoff: you pay taxes now at a lower rate to avoid paying taxes later at a potentially higher rate. For tech workers expecting to have high incomes throughout their careers and in retirement (if you accumulate enough to sustain lifestyle from taxable and traditional accounts), conversion during low-income years is often mathematically attractive.

NUA: the rare case where you don't roll

Net Unrealized Appreciation (NUA) is an exception to the rollover-everything rule. If your 401(k) holds your employer's own stock with significant appreciation, you may be better off taking a lump-sum distribution of that stock — paying ordinary income tax on its original cost basis, then holding it outside the plan. When you eventually sell, the appreciation (the NUA) is taxed at long-term capital gains rates (0/15/20%) rather than ordinary income rates.⁴

NUA is rarely relevant for most FAANG employees — Amazon, Apple, Google, Meta, and Microsoft typically don't allow employees to hold company stock as an investment option inside the 401(k). But if you're at a company that matches in company stock and you've held it for years with significant appreciation, NUA is worth analyzing before you roll.

The math favors NUA when: (a) the NUA is large relative to cost basis, (b) your ordinary income rate significantly exceeds the long-term capital gains rate, and (c) you need or want to access the funds before age 59½ without penalty. An advisor who specializes in tech compensation can model this specifically.

Unvested employer match: what you leave behind

Your own contributions are always 100% yours. Employer matching contributions vest on a schedule — typically cliff or graded vesting over 1–4 years. When you leave before full vesting, you forfeit the unvested portion.

Standard vesting schedules at large tech companies:

• 3-year cliff: 0% until year 3, then 100%. Common at some large companies.
• 4-year graded: 25% per year. You keep what's vested at departure.
• Immediate: Some startups and companies match immediately — no forfeiture risk.

The rollover only applies to the vested balance. Whatever is unvested stays with the plan (or is forfeited per plan terms). Check your plan document or the HR portal before leaving to understand exactly what you're keeping.

Rolling multiple old 401(k)s: consolidation

If you've been in tech for 5+ years, you may have 401(k) accounts at two or three old employers. Each sitting idle, likely with default-ish investment allocations and plan admin fees you're paying. Consolidating into a single IRA or your current employer's plan:

• Simplifies tracking and rebalancing
• Eliminates duplicate plan admin fees
• Makes pro-rata calculations simpler (or solves them by rolling all to the 401(k))
• Prevents accounts from going dormant and getting escheated to the state (yes, this happens)

If the old plans are small (<$5,000), some plans automatically roll them to an IRA on departure — check your plan's forced rollover threshold.

Step-by-step rollover checklist

1. Decide: IRA or new employer 401(k)? If you do backdoor Roth — or plan to — lean toward the new employer's plan to keep IRA balance at zero. Verify the new plan accepts incoming rollovers before deciding.
2. Check unvested match. Calculate what vests before your last day; factor into your departure timing if meaningful.
3. Request a direct rollover from your old plan. Call or initiate online. Ask for trustee-to-trustee transfer. Never take the check.
4. Provide rollover instructions. If rolling to an IRA, the custodian (Fidelity, Schwab, Vanguard) will give you account info. If rolling to a new employer plan, get rollover deposit instructions from the new plan's recordkeeper first.
5. Invest the proceeds. Rollover amounts often land as cash. Set the investment allocation in the new account — don't leave it in a money market fund.
6. If gap year and income is low, evaluate Roth conversion. Model the bracket headroom before year-end. Convert what makes sense at this year's lower rate.
7. Update beneficiary designations. Old plan beneficiary designations don't transfer. Set new designations on the IRA or new employer plan.