Eligible Rollovers into a Self-Directed IRA: What Accounts Can You Transfer?

Eligible Rollovers into a Self-Directed IRA: What Accounts Can You Transfer? Self-directed IRAs provide investors with the flexibility to allocate retirement savings into alternative assets such as real estate, precious metals, private placements, and more. A common and tax-efficient way to fund a self-directed IRA is through a rollover from another retirement account. The Internal Revenue Code (IRC) allows certain distributions to be rolled over directly into an IRA without immediate taxation, preserving the tax-deferred (or tax-free, in the case of Roth) status of the funds. Below, we outline the primary types of accounts eligible for rollover into a self-directed IRA, with special attention to non-qualified plans like governmental 457(b) accounts.

Eligible Accounts for Rollover

The IRS permits rollovers from various qualified and tax-advantaged retirement plans into a traditional IRA (and, in appropriate cases, Roth IRA conversions with tax consequences). Key eligible sources include:

  • Traditional IRAs
    Direct transfers or 60-day rollovers from one traditional IRA to another are simple and unlimited in number of direct transfers (though indirect 60-day rollovers are limited to one per 12-month period per IRC § 408(d)(3)). This is one of the most straightforward ways to move funds into a self-directed IRA.

  • Roth IRAs
    Funds from an existing Roth IRA can be directly transferred to a self-directed Roth IRA. No taxes apply on a direct rollover, and the five-year holding period for qualified distributions continues from the original account.

  • 401(k), 403(b), and Governmental 457(b) Plans
    Eligible rollover distributions from employer-sponsored plans—including 401(k)s (including solo 401(k)s), 403(b) plans for nonprofit and public education employees, and governmental 457(b) deferred compensation plans—are fully eligible for direct rollover into a traditional IRA under IRC § 402(c) and § 457(e)(16). This includes plans from private employers, tax-exempt organizations, and state or local governments. A direct trustee-to-trustee rollover avoids the mandatory 20% federal tax withholding and keeps the funds tax-deferred. These rollovers are especially valuable for consolidating accounts into a self-directed IRA to gain access to alternative investment options.

Special Note: Governmental 457(b) Plans and Rollover Eligibility

Governmental 457(b) plans—such as many state employee deferred compensation programs (e.g., California’s Savings Plus plan)—are explicitly eligible for rollover to an IRA. IRC § 457(e)(16) treats distributions from governmental 457(b) plans as eligible rollover distributions, allowing a direct rollover to a traditional IRA without triggering immediate taxation. This clear IRS position provides significant flexibility for public-sector employees who wish to move funds into a self-directed IRA for broader investment choices.

Important limitation: Even though governmental 457(b) plans are rollover-eligible, most participants cannot access or roll over funds until they separate from service with the employer (retirement, resignation, termination, etc.). Unlike some 401(k) or 403(b) plans that may allow in-service withdrawals or rollovers after age 59½, governmental 457(b) plans generally restrict distributions until separation from employment (with limited exceptions, such as unforeseeable emergencies). Once separation occurs, eligible distributions can be rolled directly into an IRA. Always review your specific plan documents, as administrative rules may vary. Non-governmental 457(b) plans (offered by tax-exempt organizations) do not qualify for rollover to an IRA and follow different distribution rules.

Important Considerations for Rollovers

  • Direct vs. Indirect Rollovers — Use a direct trustee-to-trustee rollover whenever possible to avoid 20% mandatory withholding (on eligible distributions) and the risk of missing the 60-day window for indirect rollovers.

  • Roth Conversions — Funds from a traditional IRA, 401(k), or eligible governmental 457(b) can be rolled into a Roth IRA, but this triggers ordinary income tax on the converted amount in the year of conversion.

  • After-Tax Contributions — If the source account includes after-tax (non-deductible) contributions, track them carefully to avoid double taxation (basis recovery rules under IRC § 72).

  • Plan-Specific Restrictions — Employer plans may have additional requirements (e.g., separation from service, spousal consent, or administrative forms)—always confirm with your plan administrator before initiating a rollover.

Rollover rules are governed by IRC Sections 402, 403, 408, and 457, with additional guidance from IRS publications and notices. The ability to roll over from qualified plans and governmental 457(b) accounts into a self-directed IRA creates meaningful opportunities for alternative investing while maintaining tax advantages. Rollover eligibility and timing depend on individual circumstances—plan rules, employment status, age, and tax basis can all affect the process. Consulting a qualified tax or financial advisor is essential to ensure the rollover is handled compliantly and supports your long-term retirement strategy.

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