Rollover IRA

A traditional individual retirement account holding money from a qualified plan or 403(b) plan. These assets, as long as they are not mixed with other contributions, can later be rolled over to another qualified plan or 403(b) plan. Also known as a conduit IRA.

Rollover IRA

An IRA to which one has transferred funds from an employer-sponsored qualified retirement account. 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. It is less commonly called a conduit IRA.

Rollover IRA.

A rollover IRA is an individual retirement account or annuity you create with tax-deferred assets you move from an employer sponsored retirement plan to a self-directed investment account.

If you arrange for a direct rollover, the trustee of your employer's plan transfers the assets to the trustee you select for your IRA. In that case the total value of the account moves from one to the other.

If you handle the rollover yourself, by getting a check from your employer's plan and depositing it in your IRA, your employer must withhold 20% of the total to prepay taxes that will be due if you fail to redeposit the full amount of the money you're moving into a tax-deferred account within 60 days.

The required withholding forces you to supply the missing 20% from another source to meet the deposit deadline if you want to maintain the tax-deferred status of the full amount and avoid taxes and a potential early withdrawal tax penalty on the amount you don't deposit in the IRA.

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There are other reasons to retain the original 401(k) plan and avoid a rollover, including whether the 401(k) plan includes company stock that has appreciated in price, which could have tax consequences in a rollover IRA.

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"The money will go directly from your employer's plan to your rollover IRA; you never touch a penny of it.

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As a planning technique, participants changing jobs and desiring maximum flexibility could have their retirement funds directly transferred through a direct rollover to a "rollover IRA." Funds can then be left in the IRA, transferred later to a new employer's qualified plan or distributed to the participant at any time without withholding.

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The report then assesses their likelihood to roll funds over into a rollover IRA within the next year as well as the average value held in these former employer sponsored accounts.

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The reason, Danaher says, is "the likelihood that participants will pay lower investment management fees through an institutional 401(k) than a retail-based rollover IRA."

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In most of those rulings, a taxpayer directs an employee of a financial institution to establish a rollover IRA, but the employee instead deposits the taxpayer's funds into a non-IRA account.

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On July 3, she rolls over her account balance from a qualified retirement plan maintained by her former employer into a rollover IRA at Finest Investments.

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This temptation arises whenever the advisor can earn a higher level of compensation providing rollover IRA services for the participant than the level of plan-related compensation that would otherwise be earned by the advisor if the participant's assets had remained with the plan.

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Additionally, Millennium Trust continues to lead the automatic rollover IRA space by providing technology-based solutions that help many of the nation's largest retirement plan sponsors to lower plan costs, reduce liabilities, and focus on current participants.