Rules, tips, and cautions about rollovers to IRAs

Are you ready? Here are some tips and rules that will help you make a smooth rollover. Rollovers can seem complicated. Rollovers can occur from qualified plans. Here, I will only focus on rollovers which come from qualified plans such 401(k), Pension and Profit Sharing Plans. The rollover will occur to a Roth IRA (or traditional IRA). It simplifies things by focusing on the common rollover scenario. Visit gold ira eligible before reading this.

You’re ready for retirement after you have worked hard to build up your 401k. Your plan is for your 401k to be rolled into an IRA. What are your options? What are your options What are your warnings?

The Rules

Within 60 days, assets must be transferred from your 401k account to an IRA. Failure to comply within this time period would result in the rollover of your assets from your 401(k) to an IRA being treated as a distribution. This would result in it being subject to taxation.

If you’re unfortunate enough to lose your plan assets in bankruptcy, the IRS may allow you some flexibility. While your money may be frozen, the 60-day time limit is not in effect. It is important to know this even though it may not happen very often.

The trustee-totrustee transfer is the best way to perform the rollover. 20% withholding applies if the qualified plan proceeds are received personally.

Your Choices

You can only accept your qualified plan transfer up to 2008 by choosing one of two IRA options: a SEP IRA or a traditional IRA. You can’t transfer it to a Roth IRA.

The Pension Protection Act of2006 provides that rollovers of qualified pension plans can be rolled-over to a Roth IRA, starting in 2007. You can still do this until then. You can roll your plan assets into a Roth IRA by first rolling them over to a traditional IRA or SEP IRA. You should remember that Roth IRA assets rolled into Roth IRAs are taxable.

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