What is an IRA, and is a rollover IRA a different kind of account?

By Kaz · Published 28 September 2026 · How this site checks figures

Summary

An IRA is a retirement account you open yourself at a bank or brokerage, and it stays with you whoever you work for. A "rollover IRA" is not a separate type of account. It is a provider's name for an IRA that receives money from a workplace plan, and when that money is pretax, the account is a traditional IRA for tax purposes.

The account belongs to you, not to a plan

IRA stands for individual retirement arrangement. A 401(k) runs under an employer's plan document and its menu; an IRA is opened by the individual with a financial institution and keeps going through any number of job changes. SEP and SIMPLE IRAs are the exception, since they are set up through an employer.

The tax type decides how the money is taxed. Traditional IRA contributions "may be fully or partially deductible, depending on your filing status and income," and the money is not taxed until it is distributed. Roth IRA contributions are not deductible, and qualified distributions are tax-free.

Why the rollover label confuses people

Open an account to receive an old 401(k) and the provider will often call it a rollover IRA. The IRS's rollover chart, which summarizes the moves allowed between account types, has columns for traditional IRAs, Roth IRAs, SIMPLE and SEP IRAs, and workplace plans. It has no column for a rollover IRA. If pretax 401(k) money goes into the account, the account is a traditional IRA.

The label still has a use. The IRS says an IRA can be rolled into a qualified plan such as a 401(k) if that plan's language allows it, and money kept separate from your other IRA savings is easier to trace if you ever want to do that. Roth IRA money is the exception: it can only be rolled over to another Roth IRA.

Moving a big balance doesn't use up the contribution limit

For 2026, what you put into all your traditional and Roth IRAs combined can't exceed $7,500 ($8,600 if you're 50 or older) or your taxable compensation, whichever is less. The IRS states plainly that this limit does not apply to rollover contributions, so a $200,000 rollover and a $7,500 contribution can land in the same year. There has been no age cutoff for regular contributions since 2020, though a Roth IRA contribution can be limited by filing status and income.

You can't borrow from it

A 401(k) plan may lend to participants. An IRA can't. The IRS says that if an IRA owner borrows from the IRA, "the IRA is no longer an IRA," and the value of the entire account is included in the owner's income. Pledging part of an IRA as collateral makes that part a distribution.

Sources

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