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Rollovers

Changed Jobs Recently?

Changed Jobs Recently?

A rollover is generally a tax free reinvestment of a distribution of a qualified plan into an IRA or other qualified plan with a specific time frame, usually 60 days. A rollover may take place when leaving a job at an employer who offered a retirement plan such as a 401(k). The company may issue a check for the amount minus 20% in withheld taxes. To avoid a tax penalty, the rollover must be done trustee to trustee, which means the check is made out to the new custodian or trustee of the rollover IRA. The company may provide a check which must be deposited into the new account within 60 days.

In addition to rolling over your 401(k) to an IRA, there are other options. For additional information and what is suitable for your particular situation please consult us.

  • You may leave money in your former employer’s plan, if permitted.
    • Pro: You may like the investments offered in the plan and may not have a fee for leaving it in the plan. This is not a taxable event.
  • Rollover the assets to your new employer’s plan, if one is available and it is permitted.
    • Pro: You get to keep all your assets together and have a larger sum of money working for you. This is not a taxable event.
    • Con: Not all employer plans accept rollovers.
  • Rollover to an IRA
    • Pro: Likely more investment options, not a taxable event, and you may be able to consolidate accounts and locations.
    • Con: There is usually a fee involved and potential termination fees.
  • Cash out the account.
    • Con: This is a taxable event and a loss of investing potential. This is particularly costly for young individuals under 59 1/2; there is a penalty of 10% in addition to income taxes.