In this time of job-changing and downsizing, you may need guidance on what to do with the assets accumulated in your company sponsored retirement plan.
- You may preserve income tax benefits by rolling over into a Rollover IRA
- You may take the lump sum and pay the tax and penalties
- You may even have the option to maintain the account
intact until retirement age
What does Rollover mean?
A Rollover moves money from a 401(k) or other qualified retirement plan into an IRA. If receiving a payout from a company-sponsored retirement plan, a rollover IRA could be to your advantage. You will maintain a tax-deferred status on your retirement savings and avoid penalties and taxes (restrictions, limitations and fees may apply).
How can I Make Contributions to a Rollover IRA?
Rollover IRA funding is usually from eligible distributions from a qualified company-sponsored retirement plan. These distributions may be combined with an existing IRA or placed into a separate IRA. We recommend that you keep a rollover IRA separate from any other IRA’s you might have. This separate IRA allows for easy movement of rollover funds to another eligible employer sponsored plan in the future. A contribution not from a company sponsored plan to a rollover IRA causes you to sacrifice the option to move the rollover to another company sponsored plan in the future.
How do Distributions from a Rollover IRA differ from Traditional?
The distribution rules for a Rollover IRA are the same as for a traditional IRA.
- Contributions and earnings are taxed when withdrawn after age 59½
- Any withdrawals before the age 59½ are taxable and subject to an early withdrawal penalty with certain exceptions
- To avoid penalties, withdrawals must begin by the year after you
reach 70½
What is a Direct Rollover Option?
If you choose to have your employer directly rollover your retirement plan payout into a Rollover IRA, you will avoid the IRS withholding tax.
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