Past employer-sponsored retirement plans may be a big temptation. Taking the money may seem easy, but it could also be costly. Withdrawing all of the funds will trigger a 20% mandatory tax withholding and a possible 10% early withdrawal penalty, if you are under age 59 1/2, in addition to paying ordinary income tax.
Keep in mind that neither Demont Insurance nor its representatives provide tax or legal advice. You should consult with an attorney or other professional advisor for such advice.
An IRA rollover is one way to:
- Keep your money tax deferred until you choose to withdraw it
- Potentially gain investment freedom
- Consolidate multiple accounts
*An IRA rollover can possibly result in a surrender charge.
*Potential purchasers seeking to use an annuity to fund a qualified or other tax-advantaged retirement plan should understand that the use of an annuity for such purpose is not necessary in order to defer taxation of investment earnings. While an annuity confers no additional tax benefit when used as a funding source for tax-advantaged plans, there are many beneficial aspects of an annuity besides tax deferral. Potential purchasers are encouraged to seek professional advice.
Considering an IRA rollover?
With an IRA rollover, you can transfer money from employer-sponsored retirement plans into a single traditional IRA. Rolling over puts your money back in your hands, so you can decide how to invest it. And, by consolidating any other retirement accounts from past employers, it’s easier to manage your investments. Your IRA may be subject to market risks, including possible loss of principal.
Does your company offer an employer-sponsored retirement plan (401(k), 403(b) or 457?
If you do, you may be able to benefit from an IRA rollover.
Three common reasons to consider a rollover are when:
- You get a new job
- Your employer stops offering a retirement plan
- You retire
Transfer the money directly:
When you set up a rollover IRA, be sure that loans on your account are paid off. Then, be sure the funds are sent directly to the administrator of your new IRA from your current plan to avoid paying tax and possible penalties. If you accept a check directly, you only have 30 days before federal taxes and early withdrawal penalties are applied, reducing your hard-earned investment.
Contributions to IRA rollovers may be limited to money that was formerly part of a 401(k), 457 or 403(b). You may not be able to add other money to your IRA rollover.
Is it worth it?
Sure, moving your money probably isn’t your idea of a good time. But there are some very sound reasons why you might want to consider it, like to:
- Preserve retirement savings by avoiding tax penalties and early withdrawal charges
- Consolidate (and, simplify) your retirement savings into one account
- Choose from a broad range of investments
And you can rollover as many accounts as you have - no matter the amount, nor the number.
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