Seven ways a Rollover IRA
can put you back in control
For many investors, rolling over retirement plan assets to an IRA is a good
idea.
Freed from the restraints your former employer’s retirement plan may impose,
once again you may have the right to choose what to do with your retirement
savings. Whether to:
1. Expand your investment options
Qualified Retirement Plans (QRPs) usually confine you to a small number of
mutual funds, annuities, or stocks. By rolling over your QRP, you can broaden
your investment options and choose the vehicle that makes the most sense.
2. Consolidate retirement accounts for easier management
Most people have retirement accounts scattered among many former
employers. By rolling over your QRP, you consolidate all of your retirement
accounts to a single location.
3. Tap assets – when you need access to your money
There are significant restrictions to withdrawing assets from a QRP. However,
when the money is rolled to an IRA, you decide when to take the money*
(although taxes and/or penalties may still apply).
4. Choose the plan document that’s “right”
Every retirement plan is governed by a plan document that establishes its
provisions. You can shop around to find the IRA plan document that best
suits your financial goals.
5. Take income prior to age 59 1/2 without
penalty
You can take an income stream from your IRA and
avoid the 10% penalty prior to age 59 1/2 using an exception found in Internal
Revenue Code (IRC) Section 72(t). This exception provides that the income
stream must be based on your life expectancy and must continue for at least 5
years or age 59 /1/2 whichever is the later. Please seek the help of a
financial professional prior to using this IRC Section 72(t) exception as it can
be tricky and penalties may apply if done improperly.
6. Split into separate IRAs for estate planning purposes
If you have multiple beneficiaries, are younger than 701⁄2, and intend for them
to inherit your retirement assets, you can split your IRA into separate accounts
and name them as beneficiary for each. This enables each beneficiary to
“stretch” the plan distributions over their own life expectancy.
7. Continue tax deferral
By rolling QRP assets directly into an IRA, you continue to take advantage
of the potential for powerful tax-deferred growth. Remember that
distributions taken before age 591⁄2 may be subject to a 10% IRS penalty.
To learn more about a rollover IRA and whether
it’s right for you, contact us today.
* A minimum distribution is required at age 701⁄2.
With all the reasons to
roll over your retirement
assets, the most important
is freedom to manage your
assets the way you see fit.
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