IRA Rollover

IRA rollover

Reinvestment of a lump-sum distribution from an IRA when physical receipt of funds has been taken by the investor. The lump-sum distribution must be deposited in an IRA rollover account within 60 days of receipt to escape taxation. Compare IRA transfer.

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IRA Rollover

The transfer of funds from a retirement account to an IRA. This usually occurs when an account holder takes a new job or otherwise wishes to take advantage of the tax benefits an IRA offers over, say, a 401(k). Most IRA programs only allow one rollover per year; with a Roth IRA, there is an income limit beyond which a rollover is not allowed. An IRA rollover may be accomplished through a direct transfer or by check; however, a check transfer brings a 20% withholding charge, so account holders are advised to make direct transfers. See also: Automatic Rollover.

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IRA rollover. If you move assets from an employer sponsored retirement plan to an IRA, you've completed an IRA rollover.

You owe no income tax on the money you move if you deposit the full amount into the new IRA within 60 days or arrange a direct transfer from the existing account to the new account.

If you're moving money from an employer's retirement plan to an IRA yourself, the plan administrator is required to withhold 20% of the total.

That amount is refunded after you file your income tax return, provided you've deposited the full amount into the new account on time, including the 20% that's been withheld. Any amount you don't deposit within the 60-day period is considered an early withdrawal and you'll have to pay tax on it.

You might also have to pay a penalty for early withdrawal if you're younger than 59 1/2. But if you arrange a direct transfer from your plan to the rollover IRA nothing is withheld.