Can a pension plan be rolled over to an IRA?

1 min read by Unbiased team Last updated June 14, 2024

Find out whether your pension plan can be rolled over into an IRA and, if so, what to consider before you make the change.


  • Rolling over a pension to an Individual Retirement Account (IRA) can result in more control over your account and a variety of tax advantages.  

  • There are pros and cons to rolling over a pension to an IRA that you need to consider before you decide if this is the right option. 

  • Many companies now encourage more flexible pension payouts and are happy to roll over to an IRA. 

  • If you are planning for retirement, working with a financial advisor can help you to make good financial decisions for your future.  

Can you roll over a pension into an IRA? 

Yes, you can roll over a pension into an Individual Retirement Account (IRA).  

When rolling over your pension into an IRA, there are two conditions you must meet: 

  1. Your pension plan must be a qualified employee plan that follows IRS rules.  

  2. You must be leaving your current company through retirement or other circumstances, or the company is closing its pension plan.  

Historically, most businesses have offered employees defined benefit plans, which offer employees a lump sum at the end of their careers based on tenure and years of service.  

However, as employees have generally stopped working at the same company for life, the need for a more flexible pension payout system has grown. This is where the pension rollover to IRA comes in — and why so many companies are open to facilitating the switch for employees.   

What are the benefits of an IRA? 

An IRA offers many benefits worth considering if you are planning for retirement. Unlike a regular pension, an IRA provides tax advantages such as tax-deferred growth, tax-free earnings, and tax diversification.  

Another benefit of an IRA is account control. With a pension account, the employer has control. With an IRA, the account holder has complete control. This can give you more flexibility and power over your future in retirement.  

In this sense, the benefits of an IRA are far greater for people who earn multiple income streams, make regular career switches, or aspire to grow their retirement fund as much as possible before leaving the workforce.  

What should I consider before a pension rollover to an IRA? 

Before you conduct a pension rollover to an IRA, there are a few factors you should consider.  

Some of the most important considerations include: 

  • Investment options 

You have a much wider variety of investment options when you have an IRA than a standard pension plan. With an IRA, you can invest in mutual funds, bonds, stocks, and other options.  

  • Fees and expenses 

Some IRAs have fees, such as set-up, annual transaction, broker, and annual account maintenance fees. Determining those fees prior to conducting a pension rollover to an IRA can help you make an informed decision.  

  • Retirement timeline and goals 

With a regular pension plan, you can take distributions from your account as early as the age of 55. But with an IRA, you only have penalty-free access to your distributions at age 59.5.  

If you want to withdraw distributions before then, you may have to pay a penalty of 10% of the withdrawal. Knowing when you plan to retire can help you make a more informed decision about whether rolling over your pension to an IRA is in alignment with your financial goals.  

How do you start rolling over a pension into an IRA? 

You can conduct a pension rollover to an IRA by contacting your pension plan administrator and making a formal request for rollover distribution.  

The type of pension you have (defined benefit or defined contribution) will impact the rollover process.  

With a defined benefit plan, your employer will need to approve an early pension withdrawal. Early pension withdrawals can come with penalties that vary depending on your employer’s rules.  

The rollover process with a defined contribution plan is slightly simpler and more affordable. In this instance, you can roll over all the money you contributed plus your investment gains. Generally speaking, there are no penalties or fees associated with making this move.  

Can I still work after rolling over a pension to an IRA? 

As an IRA is not tied to one specific employer, you should be able to continue working after a pension rollover to an IRA. However, you must work for a different employer than your original pension was tied to.  

However, it is important to confirm this before making the change, as not all companies will validate a rollover unless you are leaving the company or officially retiring.  

Get expert financial advice 

Rolling over a pension to an IRA is a decision that offers several tax advantages and increased retirement flexibility. However, depending on your employment contract, it may also have drawbacks, such as age limitations and potential penalties.  

To learn more about rolling over a pension to an IRA, let Unbiased match you with an expert financial advisor so that you can plan your future strategically.  


Unbiased team

Our team of writers, who have decades of experience writing about personal finance, including investing and retirement, are here to help you find out what you must know about life’s biggest financial decisions.