Changing jobs or looking for better retirement savings options?
If you have money sitting in an old 401(k) or another retirement plan, an Individual Retirement Account (IRA), you may consider roll over them into a Roth IRA.
Rolling your funds over into a rollover IRA may give you more flexibility, lower fees, and better choices than employer-sponsored plans.
But if you don’t follow the right steps, you could face unexpected taxes or penalties.
This guide will demystify the process and provide you with some helpful information on IRA rollovers, so you can avoid some common mistakes.
What is an IRA Rollover?
An IRA rollover transfers funds from a former employer’s sponsored retirement account to an individual IRA, allowing investors to consolidate savings or get better investment options while maintaining the tax-deferred status of the assets. This helps you keep your retirement savings tax-deferred while giving you more flexibility in how your money is invested.
There are two main ways to roll over funds:
- Direct Rollover – Your current retirement provider sends the money directly to your new rollover IRA bank account.
- Indirect Rollover – You receive the money first and must deposit it into a Rollover IRA within 60 days to avoid taxes and penalties.
Step-by-Step Guide to an IRA Rollover
Step 1: Decide Where to Move Your Money
Before rolling over your funds, you must choose a financial institution to hold your rollover IRA account. Look for an option that offers:
- Low or no account fees
- A wide range of investment choices
- Good customer service and digital banking tools
Step 2: Open a Rollover IRA
Once you’ve chosen a provider, open a rollover IRA account and make sure it’s set up to receive the funds. Many financial institutions allow you to do this online.
Step 3: Request a Direct Rollover
Contact your current retirement plan provider and request a direct rollover to your new IRA.
You may need to fill out a form or make a phone request. To avoid any tax issues, specify that the funds should be sent directly to the new institution.
Step 4: Confirm the Transfer
Once the money has been moved, check your rollover IRA account to ensure the funds have arrived. If you received a check payable to you, deposit it into your IRA within 60 days to avoid penalties.
Step 5: Choose Your Investments
A rollover IRA gives you more investment choices than a workplace retirement plan. Depending on your financial institution, you may be able to invest in:
- Mutual funds
- Exchange-traded funds (ETFs)
- Individual stocks and bonds
- Certificates of deposit (CDs)
If you are looking for stable return on your IRA savings, you may consider an IRA CD. Reputable banks like SBIC offers IRA CD with competitive rate. Contact us to learn more.
Making the Most of Your IRA Rollover
A rollover IRA can be a good way to manage retirement savings, but it’s also important to keep other savings options open.
If you’re looking to keep cash for short-term goals, consider opening a savings account for easy access to funds or opening a highest interest cd account.
For those managing finances across borders, opening a remittance account can help you stay connected to your money while enjoying seamless international transactions.
Final Thoughts: Is an IRA Rollover Right for You?
If you’ve changed jobs or want more control over your retirement funds, an IRA rollover can help you grow your savings while keeping your tax benefits.
Just be sure to follow the proper steps to take advantage of the tax benefits and avoid penalties.
By choosing the right institution, you can have the tools you need to build a stronger financial future—one that works on your terms.
