Rollovers into IRAs – Rules, Tips and Caution

Are you ready retire and transfer your qualified plan to an IRA. If you are, these are the rules to follow and some tips that can help you avoid problems when rolling your qualified plan over to an IRA. On gold star self directed ira you can learn more.

Rollovers may be confusing. Rollovers may be from qualified plans. This includes Guest Posting tax sheltered and annuities, eligible government plans, and five types of IRAs.

Here I will be focusing on rollovers coming from qualified plans like 401 (k), pension, and profit sharing plans. The rollover is to a Roth IRA and a traditional IRA. By limiting the explanation to a single scenario, it makes it easier and eliminates any discussion of other rollover situations.

You have worked hard, have built up a huge 401k and are now ready to retire. You have a plan to roll your 401k into a retirement account. What are the rules of rolling your 401(k) into an IRA? Which are your choices? What are the dangers?

The Rules

Your 401(k), IRA, or other assets must be transferred within 60 days. Failure to do this within 60 days will result in your rollover being considered a distribution. This would make it subject to taxation. If you are below the age of 59 1/2, it could also be subjected a 10% pre-emptive distribution penalty.

The IRS will offer some help if you have plan assets that were used in bankruptcy. Although your money is temporarily frozen, the 60-day clock does not run. It’s important to be aware of this, even though it might not apply very often.

It is easiest to transfer the trustee to trustee funds. 20% withholding must be made if you personally receive qualified plan proceeds.

Your Choices

You have only two options when it comes to accepting a qualified plan rollover, a traditional IRA (or sEP IRA) until 2008. You cannot roll it over into a Roth IRA.

The Pension Protection Act of (2006) provides that rollovers of qualified plans may be rolled into a Roth IRA after 2007. There is a workaround. You’ll need to transfer your plan assets to a traditional IRA/SEP IRA then roll it into a Roth IRA. You must remember that Roth IRA assets are taxable when they are rolled over to them.

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