If you live outside the US and you want to move an old employer 401(k) into an IRA, the money usually doesn’t “move electronically” in a neat straight line. In many cases it becomes cash inside the 401(k) first, then it’s sent out via a controlled payment method (often a cheque), and only then does it land in the IRA ready to invest again.
This guide explains the process, including the common expat/NRA issues that cause delays.
The big picture: what you’re actually doing
A 401(k) is an employer retirement plan. An IRA is an individual retirement account. A “rollover” is simply moving retirement money from the 401(k) to the IRA without treating it as a normal taxable withdrawal (assuming it’s done correctly).
In practice, a rollover has three stages:
- Sell/convert the 401(k) holdings to cash (usually required)
- Send the cash out of the 401(k) using the plan’s distribution process
- Deposit the cash into the IRA (then reinvest)
Step 1: Open the receiving IRA first (and match details)
Before the plan will send anything, you normally need:
- A live IRA account number
- The same legal name (including middle initials if used)
- Correct date of birth / ID data
- Correct tax status records (especially for NRAs)
Expat reality: if the 401(k) and the IRA records don’t match, your rollover can be rejected or paused for manual checks.
Step 2: Decide the rollover method (this is critical)
Option A: Direct rollover (recommended)
This is also called trustee-to-trustee or plan-to-custodian.
- The 401(k) does not pay the money to you personally.
- Instead it sends it to the IRA custodian for your benefit.
This is the cleanest route because it reduces the risk of:
- accidental tax withholding,
- missed deadlines,
- and “this looks like a withdrawal” problems.
Option B: Indirect rollover (high risk for expats)
This is where the 401(k) pays the money to you, and you then have to put it into the IRA yourself.
Why it’s risky:
- There’s a strict 60-day deadline to get it into the IRA.
- The plan may withhold tax before you even receive the money.
- Postal delays, banking friction, and identity checks can cause you to miss the window.
For most expats, indirect rollover is where things go wrong.
Step 3: The 401(k) usually sells investments to cash
Most 401(k) plans hold funds that are only available inside the plan (institutional share classes, “plan-only” funds). So even if you want your investments moved “as is,” they usually can’t.
So the plan will:
- sell the holdings,
- settle trades,
- and create a cash balance ready for distribution.
This can take a few business days depending on the plan, the funds, and any trading cut-offs.
Step 4: The plan sends the money out (and why cheques are common)
Here’s the part that surprises many expats:
Many 401(k) administrators still send a physical cheque
Even in 2026, it’s common for 401(k) rollovers to be paid by cheque because:
- the plan’s distribution system is built around cheque workflows,
- it reduces fraud risk,
- and it creates a paper trail they’re comfortable with.
Why they sometimes only mail to the “registered address”
Some plans will only mail to the address on file (or they add a hold after an address change) to prevent fraud.
Practical impact for expats:
- If your address is outdated, the cheque can go to the wrong place.
- If you update your address, the plan may impose a security hold and request extra documents.
- Courier delivery may or may not be allowed.
Direct rollover cheque wording (what it typically looks like)
In a direct rollover, cheques are often made payable to something like:
- “[IRA Custodian Name] FBO [Your Name]”
(“FBO” means “For Benefit Of”)
That wording is important because it signals it’s not “cash paid to you for spending.”
Step 5: The money arrives at the IRA and is credited as cash
When the IRA custodian receives the funds (cheque or electronic payment), they:
- apply it as a rollover contribution into your IRA,
- and the IRA shows a cash balance ready to invest.
Only after it clears can you:
- buy funds/ETFs/shares inside the IRA,
- or position the cash as needed.
What makes expat / Non-Resident Alien rollovers slower
These are the most common friction points:
1) Identity and address verification
Living overseas can make “standard” US checks harder:
- no US utility bill,
- no US phone number,
- address formats don’t match automated systems.
2) Withholding confusion
If the plan treats the payment as a distribution to you (even accidentally), it may apply withholding. For NRAs, withholding rules can be different and sometimes more aggressive if paperwork isn’t up to date.
3) “We only mail cheques”
If you can’t reliably receive mail, the transfer becomes operationally difficult.
4) Timing gaps (out of the market)
Because the 401(k) holdings are sold first, you may have a period where:
- the money is in cash,
- in transit,
- and not invested.
A simple “cash journey” summary (end-to-end)
- Open IRA
- Submit rollover paperwork (prefer direct rollover)
- 401(k) sells investments → cash
- Plan issues payment (often cheque)
- Cheque is delivered and deposited by IRA custodian
- IRA credits cash as rollover
- You reinvest inside the IRA
How to reduce problems (best-practice checklist)
- Choose direct rollover wherever possible.
- Confirm your registered address on the 401(k) before starting.
- Ask the plan what payment methods are available: cheque, ACH, wire.
- Ensure the cheque is payable to the IRA custodian FBO you, not to you personally (where possible).
- Build in buffer time for:
- trade settlement,
- mailing,
- and cash clearing.
- Keep records: distribution confirmation, cheque details, deposit confirmation.
Important note on tax
This is a process explainer, not tax advice. The “right” rollover method and the tax reporting can depend on:
- your residency status (US resident vs non-resident alien),
- treaty positions,
- whether you also pay tax in another country,
- and how the payment is coded by the plan.
If you want, I can add a short FAQ section to the bottom of the article (e.g., “Can an NRA have an IRA?”, “Will my plan withhold tax?”, “What if I can’t receive mail?”, “How long does it take?”) in the same WordPress-ready style you used for the ACATS page.