Why this is correct (Q6 — direct rollover transfers assets without you receiving the funds): A direct rollover means plan assets are transferred straight from the old plan custodian to the new qualified account (new employer plan or IRA) without the account owner taking possession. Because the funds do not pass through your hands, there is no mandatory tax withholding and no immediate tax event for pre-tax balances. This preserves the tax-deferred (or Roth) status and avoids potential penalties associated with an indirect rollover where the distribution is paid to you and then you have to complete a rollover within a limited time window. Direct rollovers are often recommended when portability and tax continuity are priorities.

Practical takeaway & actions to take: When leaving an employer, ask for a direct rollover form or request your former plan’s administrator to transfer the balance directly to the receiving custodian. Confirm whether any small-balance rules apply (some plans automatically cash out very small balances), check investment options and fees at the new destination, and ensure paperwork names the receiving account correctly to avoid unintended taxation. Keeping funds tax-advantaged and consolidating accounts can simplify long-term recordkeeping and investment management.