What’s a rollover?
A rollover is when you move the assets in an employer-sponsored retirement plan, such as a 401(k) or 403(b), into an IRA.
How long does a rollover take?
Rollovers typically take 2 to 3 weeks to complete.
When I’m having my money rolled over to and IRA, whom should I have the check made out to?
Portfolio Financial will assist you by completing the necessary forms and, if needed, conferencing in your existing plan sponsor. Once we’ve helped you select the appropriate destination for your rollover funds, we can provide the new custodian’s information for your new account. The check will be made out to the new custodian for your benefit (FBO).
Where should I have the check mailed?
Portfolio Financial will provide mailing instructions to your current retirement plan custodian, and follow up to ensure that the check is received by the new custodian within 60 days to avoid paying potential taxes and penalties on your savings. If the existing plan sponsor mails the check to you first, please don’t endorse the check. Contact your Portfolio Financial advisor for assistance. We’re here to help!
Can my money be wired directly into my new IRA?
It depends. Some providers allow for wire transfers, while others don’t. Portfolio Financial will help you facilitate the transfer, and will follow up. We’re committed to making the process as easy as possible.
Do I have to select mutual funds for my IRA right away?
No. If you’re not ready to decide how to invest your savings, we’ll help you choose a fund to put your money in temporarily until you’re ready to decide on your long-term goals.
Minimums, costs, and fees
How much money do I need to open an IRA?
This depends on the investment company. Based on your unique situation, Portfolio Financial will help you select the most potentially cost-effective, appropriate destination for your funds.
How much does it cost to roll over my savings into an IRA?
Some custodians will charge a customary annual custodial fee, while others waive this charge. Portfolio Financial will help you avoid this fee when possible, as well as front-end and back-end sales charges.
Rollovers and asset transfers
What’s the difference between a rollover and an asset transfer?
The main difference between a rollover and an asset transfer is where the money is held before it’s moved to your new IRA. If you’re moving money to your new IRA from:
• An employer-sponsored plan, such as a 401(k) or 403(b), you can initiate a rollover—typically, when you change jobs or retire. When you roll over retirement plan assets, you’re moving them from a group plan into an IRA (which generally offers greater investment flexibility).
• An IRA at another financial institution, you can initiate an asset transfer, tax-free. You can also transfer securities held in a brokerage IRA at another financial institution into your new IRA.
Can I roll over my employer-sponsored retirement plan assets into a new IRA?
Yes. You can roll over almost any type of employer-sponsored retirement plan, such as a 401(k) or 403(b), into a new IRA.
Can I transfer any additional IRA savings I may have outside of my employer-sponsored retirement plan into a new IRA?
Yes. You can move any IRA money you have saved outside of your employer-sponsored plan into an IRA through an asset transfer.
Can I roll over my retirement plan assets into a Roth IRA?
If you have a Roth 401(k) or 403(b), you can roll over your money into a Roth IRA, tax-free.
If you have a traditional 401(k) or 403(b), you can roll over your money into a Roth IRA. However, this would be considered a “Roth conversion,” so you’d have to report the money as income at tax time and pay ordinary income tax on it. Portfolio Financial can help you understand the pros and cons of a Roth conversion, based on your goals and current and future tax position.
Once I roll over my retirement plan assets into a new IRA, can I make additional contributions to my account?
Yes, you can make contributions to your IRA, subject to the IRS annual contribution limits ($5,500 for the 2015 tax year, $6,500 if you’re age 50 or older). But you must keep Roth IRA and traditional IRA money separate.
Just remember that once you add money to your rollover IRA, you may not be able to roll the account into a future employer’s plan.
Can I keep the same funds I have in my retirement plan?
Yes. Oftentimes the fund family will allow you to transfer assets “in kind” without charging a front-end sales charge. Portfolio Financial can help you determine if you are eligible for this type of transfer.
Withdrawals
Can I take money out of my IRA before I reach retirement?
Yes. And you don’t have to pay it back like you would with a loan from your employer-sponsored plan.
However, withdrawals you make before age 59½ may have consequences:
• Roth IRA: There’s a 10% federal penalty tax on withdrawals of earnings before age 59½. Withdrawals of your contributions are always penalty-free.
• Traditional IRA: There’s a 10% federal penalty tax on withdrawals of contributions and earnings before age 59½.
There are some exceptions* to the 10% penalty, so be sure to check the IRS website for details.
Go to irs.gov for more information about early withdrawals
External site
Start your rollover online
FOOTNOTE
*IRA distributions received before you’re age 59½ may not be subject to the 10% federal penalty tax if the distribution is due to your disability or death; is distributed by a reservist who was ordered or called to active duty after September 11, 2001, for more than 179 days; or is for a first-time home purchase (lifetime maximum: $10,000), postsecondary education expenses, substantially equal periodic payments taken under IRS guidelines, certain unreimbursed medical expenses, an IRS levy on the IRA, or health insurance premiums (after you’ve received at least 12 consecutive weeks of unemployment compensation).
You may wish to consult a tax advisor about your situation.
EXPLORE YOUR OPTIONS AND WEIGH THE PROS AND CONS
ROLL OVER TO AN IRA
ADVANTAGES
• Typically a wider range of investment options.
• Additional contributions allowed.
• Option to move assets to a future employer’s plan.
POTENTIAL DRAWBACKS
• No loans.
• Certain 401(k) investments may not be available.
REMAIN IN YOUR 401(K) OR OTHER EMPLOYER-SPONSORED PLAN
ADVANTAGES
• Access to certain investments that may not be available outside of your 401(k).
POTENTIAL DRAWBACKS
• Limited to the plan’s investment options.
• Additional contributions restricted or not allowed.
• $5,000 minimum balance typically required to remain in plan.
TRANSFER TO ANOTHER EMPLOYER-SPONSORED PLAN
ADVANTAGES
• Loans may be allowed.
POTENTIAL DRAWBACKS
• Limited to the plan’s investment options.
• Possible waiting period before transfer can take place.
CASH OUT YOUR 401(K) ACCOUNT
ADVANTAGES
• Money immediately available to cover current expenses.
POTENTIAL DRAWBACKS
• 20% withheld for income taxes.
• 10% early withdrawal penalty if you’re under age 59½.1
• Loss of future tax-advantaged growth.
FOOTNOTE
1 Distributions received before you’re age 59½ may not be subject to the 10% federal penalty tax if the distribution is due to your disability or death; is distributed by a reservist who was ordered or called to active duty after September 11, 2001, for at least 180 days; is part of a series of substantially equal periodic payments taken under IRS guidelines; or is for certain unreimbursed medical expenses, an IRS levy, or if you left your job during or after the year you turned age 55.
There are important factors to consider when rolling over assets to an IRA or leaving assets in an employer retirement plan account. These factors include, but are not limited to, investment options in each type of account, fees and expenses, available services, potential withdrawal penalties, protection from creditors and legal judgments, required minimum distributions, and tax consequences of rolling over employer stock to an IRA.
You may wish to consult a tax advisor about your situation.
