When planning for retirement or selling a business, it is vital to consider where you will continue to have your money after your exit. If yourcompany has established a 401(k) or other retirement plan (probably where most of your money is), you must consider what you are going to do with these retirement assets when you retire. An IRA rollover is often used as an option because it provides a number of benefits.
Normally, if you take out money from your retirement plan, you must withhold 20% for taxes (if the distribution is made out in your name). Then, if you choose to transfer the original amount in another fund, you'll have only 60 days to make up the difference. You can avoid this mandatory withholding by directly rolling over your retirement investments to an IRA. In this situation, the payment is made directly to the financial institution that will hold the IRA . With this method, you can potentially avoid early withdrawal fees and taxes.
An IRA transfer allows you to continue tax deferral on your retirement savings. In deferring your taxes as such, you can end up with substantially more in your savings when it comes time to take the money out. The money that would have been withdrawn to pay taxes is left to grow and gain interest. By the time you start making withdrawals from the accounts, you could very well be in a lower tax category. This could represent even more tax savings.
IRAs offer a variety of investment options, which makes this type of investment all the more attractive. They allow you to spread out your investments in shares of stocks, bonds, mutual funds, REITs, and other types of plans that may not be available in your 401(k) plan. Your financial team can help you select the proper asset distribution for your IRA.
If you roll over your retirement savings into an IRA account, you could be allowed to transfer it to a Roth IRA eventually. This method will only require you to pay taxes on the funds converted, but not on any future gains (after the conversion) if certain requirements are met. Your Roth IRA total would always be accessible without penalty. Furthermore, remember that you could be allowed to make disbursements tax-free for purposes such as buying a first home, disability, or death.
There are other options besides transferring your retirement savings to an IRA. You could perhaps just decide to leave your assets in the original plan. Another choice could be to take a cash-withdrawal from your plan. Lastly, if you were to decide to buy a business and that company had a retirement plan (i.e. 401(k) plan), you could shift the money to the new company's retirement plan.
Ask your advisor about the benefits of an IRA rollover. The strategy can help you retain more of your investments, maintain tax deferral on your account, and allow you more investment options.
Normally, if you take out money from your retirement plan, you must withhold 20% for taxes (if the distribution is made out in your name). Then, if you choose to transfer the original amount in another fund, you'll have only 60 days to make up the difference. You can avoid this mandatory withholding by directly rolling over your retirement investments to an IRA. In this situation, the payment is made directly to the financial institution that will hold the IRA . With this method, you can potentially avoid early withdrawal fees and taxes.
An IRA transfer allows you to continue tax deferral on your retirement savings. In deferring your taxes as such, you can end up with substantially more in your savings when it comes time to take the money out. The money that would have been withdrawn to pay taxes is left to grow and gain interest. By the time you start making withdrawals from the accounts, you could very well be in a lower tax category. This could represent even more tax savings.
IRAs offer a variety of investment options, which makes this type of investment all the more attractive. They allow you to spread out your investments in shares of stocks, bonds, mutual funds, REITs, and other types of plans that may not be available in your 401(k) plan. Your financial team can help you select the proper asset distribution for your IRA.
If you roll over your retirement savings into an IRA account, you could be allowed to transfer it to a Roth IRA eventually. This method will only require you to pay taxes on the funds converted, but not on any future gains (after the conversion) if certain requirements are met. Your Roth IRA total would always be accessible without penalty. Furthermore, remember that you could be allowed to make disbursements tax-free for purposes such as buying a first home, disability, or death.
There are other options besides transferring your retirement savings to an IRA. You could perhaps just decide to leave your assets in the original plan. Another choice could be to take a cash-withdrawal from your plan. Lastly, if you were to decide to buy a business and that company had a retirement plan (i.e. 401(k) plan), you could shift the money to the new company's retirement plan.
Ask your advisor about the benefits of an IRA rollover. The strategy can help you retain more of your investments, maintain tax deferral on your account, and allow you more investment options.
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