A Principal 401(k) rollover to IRA moves your retirement savings out of a former employer plan and into an account you direct. If you have changed jobs and left a balance behind at Principal Financial Group, you have a few choices. The right one depends on taxes, fees, and how hands-on you want to be with the money.
This guide walks through why people make the move, how the transfer works, and the few details that can trip you up along the way. Our approach to the decision is steady and planning-first: Preserve. Strengthen. Grow.™
Why Move a Principal 401(k) to an IRA?
An IRA usually opens up a wider menu of investments than an employer plan, which often limits you to a short fund list. It also lets you bring scattered accounts together, so one balance is easier to manage and rebalance. Depending on the funds you hold, the costs inside an IRA can be lower, though that is not a sure thing and is worth checking line by line.
Moving is not always the better call. A 401(k) can offer strong creditor protection, access to plan loans, and a rule that lets you tap the account penalty-free if you leave your job in the year you turn 55 or later. An IRA does not carry those same features. Weigh what you may give up against what you gain before you decide. For a wider view of the choice, see our guide to 401(k) rollovers.
How a Principal 401(k) Rollover to IRA Works
The process is short once you know the order. A direct rollover keeps things clean, because the money never passes through your hands and nothing is withheld. Here is the path people usually follow.
- Open the IRA first. Set up a traditional IRA if your Principal money is pre-tax, or a Roth IRA if you are moving Roth 401(k) dollars. Keeping the tax types matched avoids a taxable event.
- Request a direct rollover from Principal. Log in to your Principal account or call the plan line, and ask for a direct rollover made payable to your new IRA provider, not to you.
- Confirm how the funds travel. Some plans wire the money; others mail a check made out to the IRA custodian. Either way, it should land in the IRA, not your bank account.
- Check that it posted and invest. Once the balance shows up, choose your investments. Cash that sits uninvested is money that is not working for you.
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Direct vs. Indirect Rollover: Why the Difference Matters
With a direct rollover, Principal sends your money straight to the IRA and withholds nothing. With an indirect rollover, the check comes to you, Principal holds back 20 percent for taxes, and you have 60 days to redeposit the full amount, including the withheld piece from your own pocket. Miss the deadline and the shortfall can be treated as a taxable distribution, sometimes with a penalty. The direct route sidesteps all of that, which is why it tends to be the cleaner choice.
What to Watch Before You Roll Over
A handful of details deserve a look first. If you hold Principal company stock or other employer shares, a tax treatment called net unrealized appreciation, or NUA, may save you money if handled correctly, so pause before you roll those shares. If part of your balance is Roth, keep it separate so it lands in a Roth IRA and stays tax-free. Compare the fees and fund access in the IRA against what you have now, since lower cost is possible but not a given. And remember that you can sometimes leave the money in the Principal plan, which may make sense if you value its specific protections. A second look at how to make the most of a 401(k) can help you compare your options side by side.
However you decide, the move works best as part of a wider income plan rather than a one-off transfer. Pulling the accounts together is often the first step toward a steady retirement income plan you can actually follow.
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Frequently Asked Questions
How Long Does a Principal 401(k) Rollover to an IRA Take?
Most direct rollovers settle within one to three weeks. The exact timing depends on how quickly Principal processes the request and whether the funds move by wire or by mailed check.
Will I Owe Taxes When I Roll My Principal 401(k) into an IRA?
A direct rollover of pre-tax dollars into a traditional IRA is not a taxable event. Taxes can come up if you move pre-tax money into a Roth IRA, or if an indirect rollover is not fully redeposited within 60 days.
Should I Roll My Principal 401(k) into an IRA or into a New Employer Plan?
Both can work. An IRA usually offers more investment choice, while a new employer plan may keep loan access and certain protections. The better fit depends on fees, the funds available, and your own preferences.
Can I Leave Some Money in My Principal 401(k)?
Often yes, if your balance meets the plan minimum. Some people roll over part of the account and keep the rest in the plan to hold on to a specific fund or protection.
What Happens to Principal Company Stock in My 401(k)?
Employer stock can qualify for net unrealized appreciation treatment, which may lower the tax on the gains if handled in a specific order. Review this before rolling those shares, since a standard rollover can forfeit the benefit.
Does a Rollover Affect the Roth Portion of My Principal 401(k)?
Roth 401(k) dollars should move into a Roth IRA so they keep their tax-free status. Mixing Roth and pre-tax money in the wrong account type can create a tax bill, so keep the two streams separate.
Where Can I Learn More About My Options?
Our retirement planning overview explains the choices in plain language and can help you decide whether moving the account fits your situation.
