Roll Your Investments Into an IRA

One way to avoid paying taxes and penalties on your retirement plan distribution is to roll the assets into an Individual Retirement Account (IRA).

Keep 100% of Your Investment Working Toward Retirement

When you choose to roll your retirement plan assets into an IRA, your investments continue to grow tax-deferred. But a rollover IRA makes sense for another important reason – it allows you to avoid taxes and penalties on the transfer.

A direct rollover – transferring funds straight from your former employer's retirement plan into an IRA – is the easiest way to set up a Rollover IRA.

If you've already received the assets from your qualified retirement plan, you still have 60 days to roll them over into an IRA. This is referred to as an indirect rollover, and it allows you to invest up to the entire amount you received from your employer, plus the 20% withheld for your federal taxes. Although the additional 20% withholding would be paid out of pocket now, you can recover it when you file your federal tax return.

Investment Flexibility

Rolling your investments into an IRA lets you assume control over how your money is invested. Most retirement plans offer a limited number of investment options for participants, but IRA investing provides a wide range of flexibility. You can even transfer your assets into a future employer's retirement plan, as long as you've kept them separate from other IRA contributions.

Advantages of a Rollover IRA

  • Avoids current income taxes, penalties, and the 20% mandatory withholding.
  • Investments continue to grow tax-deferred.
  • You can determine your investment choices.
  • Maximum flexibility – you can, with certain restrictions, roll IRA assets into another employer's plan at a later date.
  • Offers easy access to your investments.

Disadvantages of a Rollover IRA

  • IRA assets cannot be borrowed.
  • You may have to pay annual IRA fees.
  • Not FDIC Insured
  • No Bank Guarantee
  • May Lose Value