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At some point in your career or for retirement strategy, it may be necessary for you to "move" some of your assets into one IRA. A Rollover IRA allows you to move cash or other assets from one retirement plan into another. Your "rollover contribution" is generally tax-free until the plan distributes that amount to your beneficiary.
Two types of rollovers can be made to a Traditional IRA within 60 days* from receipt of your distribution. You may:
- Rollover funds from one Traditional IRA to another
- Rollover receipts from an employer's qualified employee retirement plan into a Traditional IRA
*Funds rolled after the 60-day time period are considered taxable distributions and may incur early distribution penalties.
Rollover restrictions: You may make a rollover contribution only once during a one-year time period based on the date of the received IRA distribution.
Partial rollovers: You may rollover part of a Traditional IRA and keep the remainder, knowing funds will be taxable and may be subject to a premature distribution tax of 10%.
Other options include:
- Keeping your funds in the plan you currently have...generally an option if you have $5,000 or more in the account and are happy with the administration and returns of the plan
- Take the distribution now. A word of caution...penalties and taxes may be assessed
You cannot deduct a rollover contribution, but reporting of the distribution on your tax return is necessary. A written explanation will be given to you by the plan making the distribution.
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