Roth IRA Rollovers

Qualified Roth IRA rollovers allow you to take advantage of this flexible, versatile investment tool . Before you consider this option, check the restrictions on your current plan to make sure your existing retirement fund is eligible for Roth IRA rollovers. Some plan managers may not allow you to roll over funds from your employer-sponsored retirement account to a Roth IRA rate. However, if you already have a Roth IRA established through your employer, rolling over the funds is fairly easy.

As you plan for retirement, drawing from a number of different investment strategies can help you secure a more comfortable future as a senior citizen. The Roth offers valuable tax benefits that make this option attractive to many investors. Because the contributions are deducted from your income after taxes, you will not owe taxes on qualified distributions. As long as you have invested in the account for at least 5 years and have reached the age of 59 1/2 or meet other eligibility requirements, you may withdraw funds without tax penalties.

Rolling Over Retirement Accounts

In today's fast paced, rapidly changing world, many professionals will have multiple jobs during their lifetime. If you work for the same employer for one or more years, you may invest in a 401k, a 403b, 457, annuity or another employer-sponsored retirement plan. If you should change jobs, you may be in the market for a traditional or Roth account. Individual retirement accounts can be taken with you wherever you go in your career and can continue to earn at a tax advantaged rate for as long as you hold the account.

Roth IRA rollovers make it possible to roll over the funds in your retirement fund. You may roll over the funds from your existing account by requesting a distribution of the funds paid to you, which you may then contribute to your new account. In most cases, a 20 percent penalty must be withheld from the distribution if it is made directly to you. If you take a direct distribution, you must roll over the funds within 60 days. [1] If you exceed this limit, the IRS will consider these funds to be ordinary income, and you can be taxed on the full amount.

If your employer gives you the option of direct Roth IRA rollovers, you may have the funds transferred directly to your new account. If direct rollovers are allowed, you should not incur tax penalties if the funds are paid directly to the trustee. If rollovers are completed within the required time frame and are carried out in the right way, you will not be charged the early distribution penalty. Because rollovers from an employer-sponsored plan may have restrictions and penalties, it's important to explore your options thoroughly before you choose Roth IRA rollovers.

IRA Conversions

Conversions are fairly simple compared to rolling over funds from other retirement accounts. Rollovers from a traditional, SEP or Simple IRA may be made within 60 days after you have received the distribution. Because distributions are being made from a taxable account, you may be subject to tax on these rollovers. However, you will not incur the penalty for early distribution if you complete Roth IRA rollovers within the required time frame.

With traditional rollovers, you are limited to only one rollover per year. With Roth IRA rollovers, this 1-year waiting period is not required. [1] You may roll over the funds from one Roth IRA to another without tax penalties, provided you transfer the distribution within 60 days. If you start a new job and you are offered the opportunity to participate in your employer's 401k or 403b, you may not transfer funds from your Roth IRA to your employer-sponsored retirement plan.

Before 2010, professionals with annual incomes over $100,000 were not allowed to participate in traditional to Roth IRA rollovers. However, as of 2010, this restriction no longer applies. This change in IRS policy makes it possible for professionals with higher earnings to enjoy the same tax benefits as those with lower incomes. However, conversions will be taxed at your current income rate. If you are over the age of 59 1/2, you do not have to meet the 5-year wait limit for collecting distributions after you convert your existing account.

Rolling over one retirement account to another can be a complicated process. Before you take this step, consider IRS restrictions and requirements on the type of rollover or conversion that you want to do. By researching your options carefully, you can avoid high penalties and excessive taxes. Request information about Roth IRA rollovers from several reliable financial providers to choose an account that will help you achieve your financial goals for the future without losing a significant percentage fo the funds you've already saved.

http://www.irs.gov/publications/p590/ch02.html#en_US_2011_publink1000231036 01/09/2012

Roth IRA

YOUR GUIDE TO
Roth IRA
INFORMATION & RESOURCES