Isnare Free Articles
Authors Contents [Add OpenSearch]
Distribute your articles to more than 6,000+ sites and 40,000+ email group publisher subscribers for as low as $2 / article...
Index  Article Directory  Finances
Embed this Article  
Robert D. Cavanaugh, CLU

Robert D. Cavanaugh, CLU x 27 articles

Liked the article? Consider buying me a beer!
$

Most Recent Videos Most Recent Videos

Rollovers can be a confusing subject. This is because rollovers can come from qualified plans, tax sheltered annuities, eligible Section 457 government plans and the five types of IRAs.

Here, I will focus on rollovers that come from qualified plans such as 401(k), pension and profit sharing plans. The rollover will be to a traditional IRA or Roth IRA. Confining the explanation to a common rollover scenario keeps it simple by eliminating a discussion of the many other rollover situations.

You have worked hard, built up a big 401(k) and are ready to retire. Your plan is to roll your 401(k) into an IRA. What are the rules? What are your choices? What are the cautions?

The Rules

The transfer of assets from your 401(k) to an IRA must be completed within 60 days. Failure to do so within this time frame would treat your intended rollover as a distribution. This would subject it to taxation and, if you are under age 59 1/2, a 10% premature distribution penalty.

If you are unfortunate enough to have your plan assets invested in an institution in bankruptcy, the IRS will cut you some slack. While your money is frozen, the 60 day clock isn’t running. While this may not come into play very often, it’s reassuring to know.

The cleanest way to do the rollover is to do a trustee-to-trustee transfer. If you receive the qualified plan proceeds personally, 20% withholding is required.

Your Choices

Until 2008, you only have two IRA choices to accept your qualified plan rollover: A traditional IRA or a SEP IRA. You can’t roll it over to a Roth IRA.

The Pension Protection Act of 2006 provides that rollovers from qualified plans can be rolled over to a Roth IRA starting after 2007. Until then, there is a work-around. You will need to roll your plan assets over to either a traditional IRA or SEP IRA and then roll that into a Roth IRA. In any case, remember that when the assets are rolled into a Roth IRA, they are taxable.

The best timing of a rollover can be a function of several things. A number of people would prefer not to take the required minimum distributions beginning at age 70 1/2. Here’s a way to defer that requirement or eliminate it altogether.

If you continue to work, you don’t have to start taking RMDs until you retire. If that is later than your age 70 1/2, you have followed the rule that says RMDs start at the later of retirement or age 70 1/2 and accomplished your postponement goal.

While you would have to pay tax on a rollover that eventually winds up in a Roth IRA, distributions from Roth IRAs aren’t required until your death. If your spouse makes the election to treat your Roth IRA as his or her own, distributions are not even required until your spouse’s death.

If these facts match your circumstances and objectives, you will want to wait to do your rollover until you actually retire.

The Cautions

There are certain things that cannot be rolled over from a qualified plan to an IRA. They are technical in nature and don’t come up often. Examples would include hardship distributions from a 401(k) plan, loans that are deemed as distributions and required minimum distributions. Nevertheless, I would suggest seeking qualified tax advice prior to your rollover to make sure prohibitions do not exist.

One common limitation, however, is life insurance. If your qualified plan includes life insurance, this cannot be rolled over as IRAs cannot invest in life insurance.

This covers most of the common elements of rolling your qualified plan at work over to a traditional or Roth IRA. Armed with this working knowledge, be sure to sit down with your financial planner and accountant to make sure the transaction is done properly and matches your objectives.

Rate this article:
Robert D. Cavanaugh, CLU is a 36 year financial and estate planning veteran and author of the free newsletter, “The Estate Preservation Advisor”. To subscribe and get the free video, “How to Sell Your Life Insurance Policy for More Than the Cash Value”, go to http://theestatepreservationadvisor.com/freevideo.htm
Important NoticeDISCLAIMER: All information, content, and data in this article are sole opinions and/or findings of the individual user or organization that registered and submitted this article at Isnare.com without any fee. The article is strictly for educational or entertainment purposes only and should not be used in any way, implemented or applied without consultation from a professional. We at Isnare.com do not, in anyway, contribute or include our own findings, facts and opinions in any articles presented in this site. Publishing this article does not constitute Isnare.com's support or sponsorship for this article. Isnare.com is an article publishing service. Please read our Terms of Service for more information.

Most Recent Articles

Kitchen Decoration Process

An Article by Hasan Sarker in Home Management

6 hours ago

The kitchen is not a simple stack of cabinets, hoods, stoves and electrical appliances, but is combined with the whole kitchen environment to create a pleasant and enjoyable living space. But the face of the kitchen decoration is a lot of people can start, just hydropower transformation of this one problem can be stumped a lot of heroes, so a clear and practical kitchen renovation Raiders is even more important...

How to Find Best Contractor Payroll Management Solution in Australia

An Article by Tristan T in Business Management

9 hours ago

Now-a-day, every organization has its own unique set of head - Basic salary, Allowances, and Reimbursements. In addition to these there are sometimes variable earnings, and deductions in payroll. Additionally, there could be out of payroll payments that need to be paid once in a while. Then there is the concept of benefits which could be in or out of payroll too...

How Audio Books Can Help You in Your Workout

An Article by Jawed Smith in Computers and Technology

1 day ago

There's no doubt about it. Audio books have made life a lot much easier. For those people who want to exercise to remain in excellent shape, audio books can assist us to accomplish this with less tension. Normally people think audio books are very expensive or very monotonous. That's not actually true...

RevenueHits Review Earne – Make $800 Per Month

An Article by Sabrina Akter in Travel

1 day ago

earneRefresh: There's a mid year promo that you should exploit at the present time. In the event that you join BEFORE July fifteenth 2017 and begin acquiring with Revenuehits you will get an additional reward. Here are the terms:• A new Publisher who will – join to RevenueHits, utilize the stage for a time of 1 month and reach no less than 1000 USD in Revenues – will be remunerated with 100 USD Sign-Up Bonus;• A new Publisher who will – join to RevenueHits...

Omega De Ville Prestige Co-Axial Chronometer Automatic Power Reserve 424.20.37.20.02.001 Men’s Watch| a Classic Returns in a Modern Disguise

An Article by Jason Ca in Entertainment

2 days ago

The bottom line:The Omega De Ville Prestige Co-Axial Chronometer Automatic Power Reserve 424. 20. 37. 20. 02. 001 Men’s Watch mixes olden looks to a new design and offers a lot to enjoy. Its noticeable quirkiness is way apart from what you usually find in the mainstream brands and is free from the unnecessary conservatism...

What Are the Benefits of Aluminium Shutters?

An Article by JOSEPH ZAMMIT in Home Management

2 days ago

Aluminium is a strong and durable material that is ideally suited to external applications. It does not warp or become brittle like wood, it does not rust like iron and is perfectly suited to the harsh Australian weather conditions. It therefore follows that aluminium shutters are the best window covering option for your home...

2017 NS0-191 Dumps NCSE NS0-191 Exam Questions NetApp NS0-191 Practice Exam

An Article by Delia Green in Computers and Technology

2 days ago

NS0-191 exam is a new turning point in the IT industry. Killtest is a site that comprehensively understands the Network Appliance NS0-191 exam. Killtest is recognized as the leader of a professional certification exam, it provides the most comprehensive Network Appliance certification standard NS0-191 Dumps NCSE NS0-191 Exam Questions NetApp NS0-191 Practice Exam...

Why Quality Content is Important For Your SEO

An Article by Kate Cage in Internet

2 days ago

Search engine optimization is an important part of your business content marketing strategy. It influences your position in online search results, allows you to generate more traffic, and consequently helps you generate more leads. In other words, SEO helps your business grow. But there is a catch, you need to create quality content in order to implement SEO in the best way possible...

Healthy Employee, Productive Employee

An Article by Arati Shah in Wellness, Fitness and Diet

2 days ago

The growth of an organisation is determined by the productivity of their employees. The productivity is achieved when the employee is focused, healthy and has a positive competitive work environment. A healthy human state leads to low absenteeism and better work quality and output. Employee productivity has a direct tie to company wellbeing and the bottom line...

Lesser Known Facts About Kanwar Yatra

An Article by Devendar Agarwal in Religion

2 days ago

Facts about Kanwar YatraSawan is here. Sawan is synonymous with Lord Shiva and his worshippers, also known as Kanwariyas, they travel to places like Haridwar, Allahabad, Gaumukh, and Gangotri in Uttarakhan and Sultanganj in Bihar to get Gangajal, i. e. the holy water from the river Ganaga, to offer to Lord Shiva...

Modern Home Architecture & Decor Trends of 2017

An Article by Bimal Hegde in Real Estate

2 days ago

If you plan to buy a property in Bangalore, you surely want to keep yourself updated about the latest trends in architecture and home decor. There are plenty of 2/3bhk flats in Bangalore available for sale, but you would want to buy one that is trendy, contemporary and well designed. So, what are the residential architecture and decor trends for the year 2017...

Developing Mobile Apps 70-357 Braindump

An Article by Kruis Barry in Education

2 days ago

You can choose Passcert Developing Mobile Apps 70-357 braindump for your 70-357 Certification Exam. Passcert Developing Mobile Apps 70-357 braindump are prepared by IT Professionals. We are strongly confident that you will pass your 70-357 exam the first time. With our complete Developing Mobile Apps 70-357 braindump, you will minimize your Microsoft cost and be ready to pass your 70-357 exam on Your First Try...

H12-321 HCNP-WLAN-CEWA Exam Practice Test

An Article by Kruis Barry in Education

2 days ago

If you feel that you purchase Passcert H12-321 HCNP-WLAN-CEWA exam practice test, and use it to prepare for the exam is an adventure, then the whole of life is an adventure. Gone the furthest person is who are willing to do it and willing to take risks. Not to mention that Passcert H12-321 HCNP-WLAN-CEWA exam practice test are many candidates proved in practice...

Why Marketing Your Book is Important

An Article by Author John Fleming in Marketing

2 days ago

There are between 600,000 and 1,000,000 books published every year in the US alone. On average, they sell less than 250 copies each. With these given data on book publishing, what will you do to make you and your book stand-out. The answer is marketing. With the fast-paced book competition around the world, you need to engage yourself in the hands of the powerful marketing...

Ski and Snowboard Carriers Perfect Solution For Transporting Your Snow Gear

An Article by Tony Bulic in Travel

3 days ago

With projections and unique shapes, one cannot deny that skis, snow boards and allied snow gear just don’t pack up well. Some are undeniably long, some gear is squat and wide or bulky. Trying to fit them all into the meagre storage space of any car is going to be a challenge – they simply occupy too much space...

MLA Style Citation:
CLU, Cavanaugh, D. Robert "Rollovers To IRAs - Rules, Tips And Cautions." Rollovers To IRAs - Rules, Tips And Cautions. 05 Mar. 2008 Isnare.com. 23 Jul. 2017 <https://www.isnare.com/?aid=127478&ca=Finances>.
APA Style Citation:
CLU, Cavanaugh, D. Robert (2008, March 05). Rollovers To IRAs - Rules, Tips And Cautions. Retrieved July 23, 2017, from https://www.isnare.com/?aid=127478&ca=Finances
Chicago Style Citation:
CLU, Cavanaugh, D. Robert "Rollovers To IRAs - Rules, Tips And Cautions." Rollovers To IRAs - Rules, Tips And Cautions Isnare.com. https://www.isnare.com/?aid=127478&ca=Finances
Copy and paste the code below to embed this article:
<a class="embedly-card" href="https://www.isnare.com/?aid=127478&ca=Finances">Rollovers To IRAs - Rules, Tips And Cautions</a> <script>!function(a){var b="embedly-platform",c="script";if(!a.getElementById(b)){ var d=a.createElement(c);d.id=b,d.src=("https:"===document.location.protocol?"https":"http")+"://cdn.embedly.com/widgets/platform.js"; var e=document.getElementsByTagName(c)[0];e.parentNode.insertBefore(d,e)}}(document);</script>