Rollover, boy!

Rollovers are yet another mythical happening in the investment world. Like the Roth IRA, commercials love them, but they just sound like a lot of work. So what are these things?

It’s actually pretty simple. The term rollover refers to the movement of funds from a retirement account or IRA into another IRA.

There are two types: direct and 60-day.

A direct rollover is when you make the check out directly to the receiving custodian. In other words, you never see the money. If you or someone you know is on the fence about rolling money over from an old employer plan because they don’t know what’s involved, please give them our number because it’s usually an exceedingly simple process.

People rollover from employer plans for a variety of reasons, but main ones are broadening their investment choices, and being able to get all their money in one place so they can better plan how to use it during retirement.

The 60-day rollover is when you do get the check made out to you. This triggers a taxable event and you have 60 days to get the money back into a retirement account or the tax implications are permanent. These are a risky move especially before age 59 ½ because that 10% early withdrawal penalty is also permanent should you procrastinate.

We don’t do many 60-days because they generate tax paperwork, and no one likes tax paperwork. Where we do see them is someone taking money out temporarily for one thing or another.

These rollovers have gotten even more accident prone due to a rule change in 2015. Used to be you could do one of these transactions per account per year. That has been changed to one per person per year. So regardless of what retirement account it’s coming from or going to (401(k), Simple IRA, Roth IRA, IRA etc..) you get one in a 365-day period. You’ll notice that that’s not per calendar year, so if you plan on doing these somewhat regularly you really have to keep track of when you did your last one or your withdrawal will be taxable, no questions asked.

Now most of you have already gone through this process to invest with us so this isn’t something you’re actively worried about, but you are now armed with this knowledge for those fun financial discussions with friends and family members.


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If you are considering rolling over money from an employer-sponsored plan, such as a 401(k) or 403(b), you may have the option of leaving the money in the current employer-sponsored plan or moving it into a new employer-sponsored plan. Benefits of leaving money in an employer-sponsored plan may include access to lower-cost institutional class shares; access to investment planning tools and other educational materials; the potential for penalty-free withdrawals starting at age 55; broader protection from creditors and legal judgments; and the ability to postpone required minimum distributions beyond age 70½, under certain circumstances. If your employer-sponsored plan account holds significantly appreciated employer stock, you should carefully consider the negative tax implications of transferring the stock to an IRA against the risk of being overly concentrated in employer stock. You should also understand that Commonwealth and your financial advisor may earn commissions or advisory fees as a result of a rollover that may not otherwise be earned if you leave your plan assets in your old or a new employer-sponsored plan and that there may be account transfer, opening, and/or closing fees associated with a rollover. This list of considerations is not exhaustive. Your decision whether or not to roll over your assets from an employer-sponsored plan into an IRA should be discussed with your financial advisor and your tax professional.