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CandleFocus Glossary Editor
A rollover can be an important step in managing your retirement savings, as it allows you to transfer retirement funds from one source to another without having to pay taxes on the transactions. When you rollover funds from a qualified retirement plan such as an individual retirement account (IRA) or a 401(k), the amount transferred is tax-free.
In most rollover cases, funds are sent from a retiring plan such as a 401(k) to an IRA. The reason for this type of rollover is often to achieve more flexibility in your investments options and better control over the management of the retirement funds than is available from the 401(k) plan.
When you execute a direct rollover, the financial institution handling your 401(k) retirement plan sends the funds directly to the financial institution handling your new IRA. As long as the process is completed within sixty days, it is tax-free and not subject to the 10% early withdrawal penalty. If the process takes longer than sixty days, the IRA account holder is responsible for the payment of taxes and/or penalties as applicable.
Rollovers are sometimes done to save money as well as to achieve more investments choices. For example, if a person is being charged high fees for the management and investment of their 401(k), they may transfer the funds to new account with lower cost options.
It is important to seek advice from a qualified financial advisor and if possible a Certified Public Accountant before executing a rollover. They can help guide you to the best investment options, helping you to maximize your expected returns while minimizing risk in the long run.
In any case, whether it is to increase your investments options, lower the cost of managing your retirement funds, or both, a rollover may play a big role in your personal financial plan. It is key to carefully research your options and decide wisely before proceeding with a rollover. With a well-thought-out strategy, you can maximize returns on your investments and also ensure that your retirement funds remain secure.
In most rollover cases, funds are sent from a retiring plan such as a 401(k) to an IRA. The reason for this type of rollover is often to achieve more flexibility in your investments options and better control over the management of the retirement funds than is available from the 401(k) plan.
When you execute a direct rollover, the financial institution handling your 401(k) retirement plan sends the funds directly to the financial institution handling your new IRA. As long as the process is completed within sixty days, it is tax-free and not subject to the 10% early withdrawal penalty. If the process takes longer than sixty days, the IRA account holder is responsible for the payment of taxes and/or penalties as applicable.
Rollovers are sometimes done to save money as well as to achieve more investments choices. For example, if a person is being charged high fees for the management and investment of their 401(k), they may transfer the funds to new account with lower cost options.
It is important to seek advice from a qualified financial advisor and if possible a Certified Public Accountant before executing a rollover. They can help guide you to the best investment options, helping you to maximize your expected returns while minimizing risk in the long run.
In any case, whether it is to increase your investments options, lower the cost of managing your retirement funds, or both, a rollover may play a big role in your personal financial plan. It is key to carefully research your options and decide wisely before proceeding with a rollover. With a well-thought-out strategy, you can maximize returns on your investments and also ensure that your retirement funds remain secure.