What is A Rollover IRA

A Rollover IRA is a type of Individual Retirement Account designed for people who have changed jobs or retired and have assets accumulated in their employer-sponsored retirement plan.

Eligible distributions from such plans can be rolled over directly into an IRA without incurring any tax penalties, and assets remain invested tax-deferred. You can consolidate multiple retirement accounts into a single Rollover IRA to simplify your retirement savings and make it easier to allocate and monitor your assets.

Establishing a Rollover IRA is a flexible way to ensure your retirement savings continue to be invested and tax-advantaged, with as wide a range of investment choices as possible.

The following are reasons you may want or need to use an IRA rollover:

1IRA-to-IRA Rollover
Used to transfer funds from one IRA to another IRA and retain their tax-favored status.

2Qualified Plan-to-IRA Rollover
Used to receive distributions from an employer-sponsored qualified retirement plan (like a 401(k) and continue to defer taxation.

3Conduit IRA Rollover
Used to receive distributions from an employer-sponsored qualified retirement plan and maintain their tax-favored status until the distributions are rolled back into another employer-sponsored qualified retirement plan.

4Spousal Rollover
A surviving spouse can roll over the proceeds of an inherited IRA and continue to defer income taxation.

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5Conversion of a Regular IRA to a Roth IRA
Amounts in a Regular IRA can be rolled over to a Roth IRA if the taxpayer’s adjusted gross income does not exceed $100,000. While income taxes must be paid on amounts rolled over to a Roth IRA in the year of the rollover, there is no premature withdrawal penalty tax.

When considering an IRA rollover, you should remember:

  • There are no limits on the amount of rollover dollars.
  • As with all IRAs, withdrawals before the age of 59 ½ will be subject to a 10% penalty.
  • Distributions from qualified retirement plans must be rolled over within 60 days following receipt of the distribution, or you are subject to a 20% tax withholding.