Rolling Over Retirement Savings

Rolling over retirement savings

If you’ve recently changed jobs or retired and left behind retirement savings in your former employer’s retirement plan, you’re eligible to move those assets out of your former employer’s plan when you leave. Consider a rollover to either a self-directed IRA or a new employer’s retirement plan in order to keep growing your life savings until you retire. A financial advisor can help you figure out which path is right for you as the best rollover option will hinge on your current employment status as well as your savings and investment goals. Our latest whitepaper drives deep into the specifics and answers all the questions surrounding rolling over your retirement savings.

Download the white paper


BE CAREFUL NOT TO TAKE THE CASH

If you do take a payout, you will owe tax on the entire amount distributed in the year you take the distribution. Your plan administrator will withhold 20% of the taxable distribution and send it to the IRS as a pre-payment of the income tax you owe on the distribution, if your assets are eligible to be rolled over. Also, if you’re younger than 59 ½, you’ll have an additional 10% early distribution tax unless you meet an exception.

IF YOU ROLL OVER YOUR RETIREMENT SAVINGS

There are no tax consequences and you can preserve your savings for retirement while continuing to grow your savings. A key benefit of rolling over to an IRA is that you can consolidate savings from multiple retirement plans from prior jobs into one convenient account.

REASONS FOR IRA ROLLOVERS1

1. Do not want to leave assets with former employer
2. Preserve tax treatment of savings
3. Consolidate retirement assets
4. Want more investment options

You can contribute annually to your rollover IRA, and you can vary both the amount and the timing of contributions, within certain limits. The maximum amount you can contribute to an IRA for 2019, if eligible, is the smaller of $6,000 or 100% of compensation. If you are age 50 or over, you can add an additional $1,000 catch-up contribution each year. Rollovers are not subject to this annual contribution limit. A self-directed IRA allows you to have access to a wide range of investments. Additionally, you can distribute your IRA assets at any time, but certain investment and early distribution penalties may apply.

View the full whitepaper here

ROLLOVER RULES

Eligible Plans

If you participated in one of the following employer plans, you may roll over your savings to an IRA or to another employer plan:

•  401(k) plan
•  Profit sharing plan
•  403(b) plan (also known as a tax-sheltered annuity plan)
•  Governmental 457(b) plan (also known as a deferred compensation plan)

Eligible Assets

Types of retirement plan distributions that are not eligible to be rolled over:

•  Age 70 ½ required minimum distribution (RMD)
•  Retirement plan loan that is treated as a distribution
•  Hardship distribution taken because of a qualifying financial emergency
•  Distributions of excess contributions and related earnings
•  A payment in a series of equal periodic payments
•  Distributions to pay for life insurance coverage
•  Dividends on employer securities that are distributed from the plan
•  S corporation allocations treated as deemed distributions

TWO TYPES OF ROLLOVERS

Direct Rollover

Your savings will be relocated directly from your former employer’s plan to your new employer’s plan or an IRA. In order to do so, you must create an account with an IRA custodian or enroll in your new employer’s plan. To learn more about opening an account with STRATA, click here. You can then have your former employer send your savings to the new IRA or plan.

Indirect Rollover (60 Day)

Your savings will be paid to you and then you have the option to roll your savings to an IRA or new employer’s plan. You must complete the distribution request process required by your former employer. While the plan administrator withholds 20% of the taxable amount distributed, you may rollover all or a portion of the entire amount distributed from the plan. Any portion not rolled over will be taxable to you and subject to the 10% early distribution tax if you are under the age of 59 ½.

For more information on the details of the two options above, please view our latest whitepaper here.

Important Considerations in Rolling over an IRA

•  Tax Benefits – The portion of your wages that you save in a retirement plan lowers your taxable income for that year. Investment growth on your savings is not taxed until you take a withdrawal of your savings.
•  A key benefit of rolling over to an IRA is that you can consolidate savings from multiple retirement plans from prior jobs into one convenient account.
•  If you have any questions on topics such as Fees and expenses, withdrawal options, employer stock, creditor protection, RMDs or any type of services including investment advice or distribution planning, please contact our team and we would be happy to help.

Considerations When Rolling Over Retirement Plan Assets

Whether you’re rolling over your retirement money because of a new job or retirement, traditional IRAs and Roth IRAs both provide benefits to you, and an alternative IRA custodian like STRATA can help point you in the right direction and help answer questions along the way. Give us a call today and speak to one of our IRA custody professionals. Meanwhile, your personal financial advisor will be able to guide you through the rules and tax impacts that come with rollovers as they help you assess all your options and weigh the benefits against any potential issues.

 

  1. Investment Company Institute, ICI Research Perspective, Vol. 24, No. 10, “The Role of IRAs in US Households’ Saving for Retirement, 2018” December 2018, ici.org.

 

Tags: all things retirement, distribution, IRA, IRA Contribution limit, ira contributions, IRA Rollovers, IRS Reporting, IRS Rules, required minimum distribution, retirement, RMD, rolllover strategy, rollovers, self-directed ira

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