What is a Rollover IRA?
When you leave an employer for a new job or to retire, you have choices to make regarding your retirement account. You may choose to roll the funds you have accumulated directly into a rollover IRA. A rollover IRA is used to hold assets that have been distributed from an employer’s retirement plan such as a 401(k) or Profit-Sharing Plan. Before rolling over your retirement account from your employer, you should consider all your options to determine what is best for you. Consider the items addressed in The IRA Rollover: 10 Tips to Making a Sound Decision provided by the Financial Industry Regulatory Authority (FINRA).
There is no limit on the amount of money you can roll over. This type of an IRA can be kept separate from your Traditional IRA contributions to allow you to possibly transfer it into a new employer's plan.
- Ensures the tax-deferred status of your retirement plan(s)
- Preserves your right to transfer your savings into another employer-sponsored retirement plan at a later date if you choose
- Can consolidate retirement investments into one account
- A direct rollover helps you avoid tax withholding on your distribution (and the 10% penalty if you’re not yet 59½).
- IRA assets cannot be borrowed against or used as collateral.
- Annual IRA fees may be applicable.
If you take a distribution from an IRA or a retirement plan is paid directly to you, you can deposit all or a portion of it in an IRA or a retirement plan within 60 days. There are limitations to 60-day rollovers so be sure to consult a tax professional prior to taking a distribution you plan to roll over.
Types of Investments
Stocks, bonds, mutual funds, exchange-traded funds (ETFs), U.S. Treasuries, Brokered CDs, unit investment trusts (UITs). and annuities
Annual Contribution Limits
- $6,000 under age 50
- $1,000 additional catch-up contribution if age 50 and over
Anyone with a qualified distribution from an employer-sponsored plan
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Consult your tax or legal advisor for tax planning relating to your current situation.
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Mutual funds, annuities, and other investment products:
May lose value
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