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Rollover Individual Retirement Account

Trying to build a reliable retirement nest egg through an IRA, or Individual Retirement Account, you might want to find higher returns planning with better service and more investment selections. An IRA rollover can help continue saving with a more profitable deal. Search through the options available online. An IRA rollover allows for a tax-free transfer of assets from an employer-sponsored retirement plan, or a 401k plan, to a traditional IRA. You can only do the transfer when you change a job or retire.

If you have your own IRA, not provided by the employer, distributions of funds are available any time and also tax-free. But they are subject to a set of rules.
Below are some common mistakes of rolling an IRA from one financial institution to another that can lead to taxes and penalties.

  • Unless it is a direct rollover, or a plan-to-plan transfer, a person receives a distribution check from his current institution and then deposits the funds into another IRA. The transfer has 60 days to be completed to avoid taxation. If you do not complete it within the time allowed, the distribution money is considered as ordinary income and is taxed at the current income tax rate.
  • An IRA rollover can be done in parts but is subject to the required minimum distribution (RMD) rules. It means if the amount transferred is less than the minimum required, the rollover cannot be done.

  • If it is an indirect rollover from one IRA to another, a "one-year-waiting rule" applies. For example if you roll over all or part of the amount from your account, you cannot make another tax-free transfer from the same IRA within one year. If you have two different IRAs at a time, two different tax-free rollovers a year are permitted.
  • Generally, you can make a tax-free IRA rollover at any age but if you are 70 years old and more you are not allowed to roll over your required minimum distribution as it'll be considered an ineligible (excess) contribution.
  • An IRA rollover is a good option when you need access to the funds in distribution, for example you take the cash and purchase assets with it. If you do not need the money, it's better to do a direct transfer, not rollover. The direct transfer can be done unlimited number of times and excludes such mistakes as missing the 60-day period, abusing the once per 12-months rule and losing the check.

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