Indirect Rollover

A process where retirement plan or IRA distributions are paid directly to the account holder, who then has 60 days to deposit the full amount (including any tax withheld) into another eligible retirement account to avoid taxes and penalties. Failure to complete the rollover within this window results in the distribution becoming taxable and potentially subject to early withdrawal penalties. The IRS requires employers to withhold 20% for taxes in most cases, which must be replaced using other funds during the deposit to complete a full rollover.