Rollover IRAs

• Do nothing: Many employers will allow you to maintain your account after you leave. You can continue to manage the investments within the account without any change or interruption. You cannot make additional contributions, however.
• Transfer to a new plan: If you’re changing jobs and your new employer offers a retirement plan, you may be able to move your assets into the new plan.
• Withdraw your assets as cash: If you sell and withdraw your assets, the regular withdrawal rules and penalties will apply. If you choose this option, your employer will also be required to withhold 20% of your account balance for tax purposes.
• Roll over your assets to a Rollover IRA.

What’s a Rollover IRA?

• Traditional Rollover IRAs: For participants rolling over assets from tax-deferred retirement accounts, such as regular 401(k)s, 403(b)s, or 457(b)s
• Roth Rollover IRAs: For participants rolling over assets from tax-free accounts, such as Roth 401(k)s

Should You Use a Rollover IRA?

• You’re satisfied with your existing plan and your employer will let you keep it there for at least several years after you leave
• You find your current employer’s retirement plan satisfactory and you want to roll over the assets to that plan instead

• Avoid taxes and penalties: With a Rollover IRA, you avoid the taxes and penalties you’d pay if you transferred or withdrew money from your account.
• Keep growing your money: Using a Rollover IRA is a seamless way to keep your retirement investments growing without interruption.
• Expand your investment options: Rollover IRAs usually allow you to invest in virtually any type of investment, from individual stocks to bonds to mutual funds, depending on the financial firm you choose. Any constraints imposed by your employer-sponsored plan will no longer apply.

How to Roll Over Your Existing Retirement Plan Account into a Rollover IRA

1. Set up a Rollover IRA account: Contact the financial services firm you intend to work with and ask about the forms and other documentation required to open a Rollover IRA. You’ll usually have to provide a copy of your most recent retirement plan statement. In most cases, the firm will offer to contact your employer to handle the rest of the rollover process for you. Even if they do, you should still follow the remaining steps.
2. Tell your current employer: Tell your employer that you intend to roll over your retirement plan. Give them the contact information of the firm where your Rollover IRA will reside, and tell them you want to perform a direct rollover rather than have them cut you a check for the balance of your account. If they insist on cutting you a check, make sure the check is made payable to your Rollover IRA provider—not to you.
3. If your employer issues a check payable to you: Your employer will be required to withhold 20% of your balance, and you may be required to pay a 10% penalty when you do the rollover. To prevent this, ask your employer to cancel the check and make it payable to your Rollover IRA provider. If they refuse, you can avoid a 10% penalty as long as you use the check made payable to you within 60 days to fund a Rollover IRA. However, your employer will have already withheld 20% of your account balance for taxes. Usually, the only way to get that money back is to add that amount to your Rollover IRA with your own money for the time being, and then request a refund for those funds when you file your tax return. To qualify for this refund, you must roll over 100% of your account balance.