Here we are going to learn about a Rollover IRA. For those that are looking to move their 401k money due to a job transfer or loss, the rollover IRA is a perfect choice. Part of the benefit is that in the future you will be able to take your IRA rollover and roll it into a new employer’s 401k plan.
In order to be able to roll from a 401k to IRA and back again, it is important that you keep your rollover IRA separate from any traditional IRA or Roth IRA assets. If the funds are co-mingled, you will not be able to move the rollover IRA funds from your IRA account to the 401k at your new job.
Another great aspect of a rollover IRA is that there is no maximum amount of money that can be moved into and out of your new IRA account. This allows you to pick the best method of investment for your funds without worrying about a limit. For example, if your new employer has a 403b retirement plan that does have as good investment choices as your current rollover IRA then you do not have to move it. But if you change jobs again to a company with a great 401k plan, then all of your funds can be rollover to 401k.
Make sure you are not taxed for your rollover IRA and future rollover 401k by following all the rules set out by the IRS. It is best to have your 401k rollover distributed into the rollover IRA directly instead of having the money given to you individually to prevent any tax problems with your rollover. If the money is given to you, then you have 60 days to deposit all of the funds into the new rollover IRA account. Significant tax and penalty fees will be will be charged if the funds are not deposited correctly by that time.
This has been you introduction to a Rollover IRA. We will cover more in depth topics for retirement plans in the future.