Rollovers to a Traditional IRA

• Most employer-sponsored retirement accounts, including 401k, 457 and 403b plans, are tax-deferred, meaning you can deduct contributions from your income but pay income taxes on qualified withdrawals. Traditional IRAs are also tax-deferred accounts. Therefore, you usually can roll an employer-sponsored plan into a traditional IRA without paying taxes on the amount.
  
  

Rollovers to a Roth IRA

• The IRS taxes Roth IRA contributions, but it allows you to take tax-free withdrawals from your account the year you turn 59 1/2. Therefore, money your Roth IRA assets earn winds up being tax-free. If you make a conversion from a tax-deferred employer-sponsored plan or traditional IRA to a Roth IRA, you owe income taxes on the amount.
  
  

Roth IRA Transfers

• If you rolled your employer retirement account into a Roth IRA, you cannot convert the money to a traditional IRA unless you recharacterize the amount before your filing deadline. The recharacterization process allows you to "undo" your Roth IRA contribution, essentially treating it as though it never happened. After your filing deadline passes, however, you can only transfer the Roth IRA funds to another Roth IRA.
  
  

Traditional IRA Transfers

• If you rolled your employer-sponsored account into a traditional IRA, you are free to transfer it to another traditional IRA without tax or penalty. You are also free to make a Roth IRA conversion by paying income taxes on the amount you wish to convert. Doing so may result in a hefty tax bill in the short term, but it allows you to accumulate tax-free investment earnings over the life of the account.