Yes, in fact this is what most people do. This is a very popular choice.

Because Traditional IRAs receive the same kind of tax treatment as 401(k)s, with pretax contributions, tax-deferred growth, and taxable withdrawals, the IRS allows you to move funds over without creating a taxable event.

Of course, you need to have an IRA account to do so, but it can be as easy as opening an account online and telling the custodian company the account information for your old 401(k).

More often than not you will have to liquidate your positions in the 401(k) before rolling the funds into an IRA, but this can be done with a short phone call. Transferring your funds from a 401(k) to an IRA can give you a wider variety of investment vehicles to choose from, and the IRA may have lower fees than the 401(k).

The most popular way to do a “rollover” now is electronically with a direct custodian-to-custodian transfer. Transfers cut down on some of the problems that can potentially crop up with a Rollover. In a traditional rollover, the 401(k) custodian would send the individual a check made out to him or her for the amount in the individual’s account.

The individual would then have 60 days to deposit that amount into a new 401(k) or IRA, but in the meantime it could go into the person’s checking account. If the person does not deposit the entire balance into a new IRA or 401(k) within the 60 days, it will be deemed a distribution for the entire amount, which will subject the money to taxes and perhaps the 10% early withdrawal penalty if the person is under 59 ½ years old.

Another way to do a transfer is the have a physical check from the old 401(k) custodian company made out to the new custodian company, FBO (for the benefit of) the client’s name, or ‘… Trustee for the IRA of (client’s name)”. This also avoids any penalties from incorrectly done rollovers.