Should You Consider a Rollover from Your Former Employer's Retirement Plan?
Millions of employees will change jobs this year through career moves, layoffs or retirement. If you are one of these employees, chances are that this change has left you with a lot to think about. And one important decision you need to make is what to do with your retirement savings.
You have several options when considering your retirement savings. The options include leaving the funds in your former employer's retirement plan (if the plan allows it), transferring it to a new employer's plan (if the plan allows it), taking a distribution in cash (penalties and taxes may apply), or rolling it to a traditional IRA.
One of the most widely used retirement distribution options is to rollover your retirement savings into a traditional IRA. Rolling an employer sponsored retirement plan into an IRA can yield a number of benefits for you the investor. The benefits may include increased investment options, consolidation of retirement accounts and the ability to prolong the tax deferral of your retirement nest egg for your beneficiaries.
When considering an IRA rollover it is important to know the IRS rules. Basically there are two options: You can request that the check be made payable to you or have the check made payable to the IRA institution (for the benefit of you.) If you take possession of your retirement distribution and the check is made payable to you, your former employer is required to withhold 20 percent of the distribution as a prepayment of the federal income tax. In addition to the taxes that are withheld, you will have 60 days to roll the money to an IRA to avoid penalties (if under the age of 59 ?.)
The preferred method of rolling funds to an IRA, is to have the IRA institution request the funds directly from the employer sponsored plan. Direct rollovers between firms eliminate the 20 percent withholding requirement.
Your retirement plan distribution may very well be one of the largest amounts you've ever invested at one time. What you do with this money can affect how you live during your retirement years. It is best to consult your financial professional before making any decisions about your retirement distributions.
The author is a CLU and ChFC designee, a Registered Investment Advisor and registered representative of Jefferson Pilot Securities Corporation, member NASD, SIPC.
Warning: NOT meant for somebody
Who Would Settle for Any Advisor
And risk their retirement
- Past Results
- Fee Schedules
- Investment Style
You may also be interested in...
By Justin Stoltzfus March 20, 2014 As financial experts sound the warning bells about the American retirement planning crisis, and how little the average worker has saved toward his or her golden years, all kinds of questions arise. What exactly do retiring workers have squirreled away to provide... more
By James O'Brien March 8, 2014 Despite a narrow brush with a new reduction to Social Security benefits, seniors will not see the proposed move to a more conservative cost-of-living adjustment, or COLA, in 2014. President Barack Obama's announcement on Feb. 2 that he was scrapping the... more
By James O'Brien By now, many investors and analysts have taken a look at President Obama's MyRA plan and drawn a reasonable conclusion: It won't get retirees through many years of post-work expenses. But then, that's not the MyRA's purpose. The federal government's newest retirement instrument... more
Millions of employees will change jobs this year through career moves, layoffs or retirement. If you are one of these employees, chances are that this change has left you with a lot to think about. And one important decision you need to make is what to do with your retirement savings. You have... more
In tax planning, the goal typically is to delay the payment of income taxes. Thus, it can be difficult to understand why it might make sense to convert a traditional individual retirement account (IRA) to a Roth IRA, which results in the current payment of income taxes. Factors that favor... more