Can You Rollover Stocks to an IRA?

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When you leave your job, you need to decide what to do with the money in your 401k. If that 401k contains only mutual funds, moving the money is as easy as liquidating those holdings and using them to buy comparable mutual funds in your rollover IRA. But if your fund also contains individual stocks, you need to give the new administrator explicit instructions about the handling of those securities.

Personal Account

  • If you hold stocks in a personal account outside of a 401k or other workplace retirement account, you cannot transfer those stocks to an IRA. You can only make the transfer if you hold the stocks within a 401k, 403b or other qualified retirement plan.

401k Plan

  • You can transfer stocks directly from your 401k to a rollover IRA, but you need to give the new administrator explicit instructions about how to handle that transaction. When you complete the IRA transfer form, you need to detail the stock positions you wish to transfer, including the number of shares you wish to transfer to the new account. If you fail to instruct the administrator otherwise, the firm handling the transfer may simply liquidate all the assets in your 401k and move them over to your new IRA. If you want to keep your stock positions intact, you need to provide explicit instructions to the IRA administrator. The details you include on the transfer form are important, but it is also a good idea to call the administrator directly and verify your instructions and your desire to keep the stock positions from your 401k plan in place.

Direct Rollover

  • Whenever you roll money from a 401k plan to an IRA, whether that 401k contains individual stocks or only mutual funds, you need to make sure the transaction is handled as a direct rollover. With a direct rollover, the money goes directly from the 401k account to the IRA. When you do a direct rollover, the administrator of the 401k makes the check payable to the administrator of the IRA. Since the money never touches your hands, you are not liable for any taxes, and the account, and the stock it contains, remain tax-deferred.

Check Your Records

  • If you hold stocks within your 401k plan and want to roll them over to an IRA, it is important to follow up with the administrator of the IRA within a few days of submitting your transfer form. Following up with the administrator is the best way to ensure that your explicit instructions are followed. If you fail to follow up on your original instructions, the new administrator could liquidate your stock positions, and you would have to reestablish them later on.

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