IRA Rollovers

Benefits of an IRA Rollover

Whether you're changing jobs or retiring, there are many potential benefits to rolling over the retirement savings you've accumulated in your former employer's plan or consolidating various IRAs into a single IRA (restrictions may apply), including:

  • More flexibility in the investments you select
  • Easier management of your retirement assets
  • Consolidated reporting and account statements
  • Simplified calculation of required minimum distributions
  • Continuation of tax deferred compounding

Please keep in mind that rolling over assets to an IRA is just one of multiple options for your retirement plan. Each of the following options is different and has distinct advantages and disadvantages.

  1. Roll assets to an IRA
  2. Leave assets in your former employer’s plan
  3. Move assets to your new/existing employer’s plan
  4. Cash out or take a lump sum distribution

When considering rolling over assets from an employer plan to an IRA, factors that should be considered and compared between the employer plan and the IRA include fees and expenses, services offered, investment options, when penalty-free withdrawals are available, treatment of employer stock, when required minimum distributions may be required, and protection of assets from creditors and legal judgments. The costs of investing and maintaining assets in an IRA with us will generally involve higher costs than the other options available. You should consult with the plan administrator and a professional tax advisor before making any decisions regarding your retirement assets.

Note: Rolling over your retirement savings into a Roth IRA may trigger a tax liability.

Direct IRA rollovers
Indirect IRA rollovers
Inheriting your spouse's retirement savings
More information about IRA rollovers

Direct IRA Rollovers

A direct IRA rollover occurs when your retirement savings is directly transferred from a qualified plan (such as a pension plan, 401(k) plan, or 403(b) plan) or one IRA to another. Amounts directly rolled over or transferred do not trigger income tax liability or the early distribution penalty that could occur with an indirect IRA rollover.

Note: Rolling over your retirement savings into a Roth IRA may trigger a tax liability.

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Indirect IRA Rollovers

With an indirect IRA rollover, you take a distribution of your retirement savings from one of your retirement accounts. With a qualified plan – but not an IRA – generally there is a mandatory withholding of 20% for federal taxes when the plan writes the check to you.

You have 60 days to roll over into another retirement account all or a portion of a distribution that is eligible to roll over. If you want to roll the total distribution amount (including withholding), you must personally deposit (out of pocket) any tax withholding that was deducted from your distribution. Any portion not rolled over, including amounts withheld, will be considered a distribution and will be subject to income tax and generally a 10% penalty if under age 59 1/2. The taxpayer will receive an IRS Form 1099R to report the total amount of the distribution and an IRS Form 5498 to report amounts rolled over. 

Note: Unlike qualified plan-to-IRA rollovers, IRA-to-IRA rollovers are limited to once in 365 days per IRA.

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Inheriting Your Spouse's Retirement Savings

If you are the beneficiary of your deceased spouse's qualified retirement plan or IRA, you have the right to roll the distribution into an IRA in your own name. Generally this will continue the tax deferral and delay the payment of income taxes. Once the rollover is complete, the IRA distribution rules apply based on your age. However, you can also take the full distribution from your spouse's retirement savings and pay ordinary income tax. Alternatively, you can directly roll over into an inherited IRA rather than your own IRA. With an inherited IRA, there would be no premature distribution penalty on distributions, even if you are under age 59 1/2.

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More Information About IRA Rollovers

For more information about IRA rollovers or for general questions related to IRAs, contact your Financial Advisor.

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Rollover IRAs may not be suitable for all investors. This material has been prepared for informational purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading/investment strategy. Investors need to make their own decisions based on their specific investment objectives, financial circumstances, and tolerance for risk. Please contact your financial professional and/or tax advisor for more information on planning for retirement and to find out if a rollover to an IRA may be suitable for your specific situation. Wells Fargo Advisors is not a legal or tax advisor. However, its Financial Advisors will be glad to work with you, your accountant, tax advisor, and or lawyer to help you meet your financial goals.