1. Money
You can opt-out at any time. Please refer to our privacy policy for contact information.

Benefits of an IRA Rollover

How an IRA Rollover can simplify your retirement planning.

By

Whenever you terminate employment after participating in a workplace retirement plan, you will have the opportunity to create a rollover IRA. A rollover IRA is an important part of any retirement plan, since a failure to take advantage could cause several negative tax implications.

What is a Rollover IRA?

A rollover IRA is identical to a regular IRA (traditional IRA) except that the source of the money is not annual contributions. Instead, the money that goes into a rollover IRA is money from a previous retirement plan, such as a 401(k) plan. Although you are permitted to rollover your 401(k) into an existing contributory IRA, you may not combine regular IRAs and Roth IRAs.

IRA Rollover Benefit 1 - Continued Tax Deferral

One big advantage of an IRA rollover is the continuation of the tax-deferred treatment you had at your workplace retirement account. Furthermore, no tax is owed on a properly executed rollover, although it is reportable transaction to the IRS.

IRA Rollover Benefit 2 - Increased Investment Options

Within a 401(k) plan, your investment options are limited to the choices provided to you by your plan custodian and your employer. Often, these choices are sufficient. Periodically, they are extensive. But with a rollover IRA, you can choose to put your money in virtually any mainstream investment imaginable.

IRA Rollover Benefit 3 - Simplification

Instead of juggling a number of former workplace retirement accounts as you switch jobs over your career, consistently rolling over your plans to a single rollover IRA reduces complexity. You can look at one account statement and see the balance, recent performance, and investment selections of most of your retirement savings.

  1. About.com
  2. Money
  3. Retirement Planning
  4. IRAs
  5. Benefits of an IRA Rollover

©2014 About.com. All rights reserved.