The Nuts and Bolts of Rollover IRAs: Just Roll With It If you lose your job, you may want to move your existing retirement account into a Rollover IRA without paying taxes or penalties. Most investment firms will send you the paperwork you need to apply for the account, as well as the forms needed to give to your employer's HR or benefits department. You can, of course, have your employer write you a check for the balance of your plan. To avoid paying early-withdrawal penalties, though, you'll have to reinvest that money in your Rollover IRA within 60 days. The IRS does have the authority to waive that 60-day requirement under certain circumstances, such as a mistake made by your financial institution, an illness, postal error, etc. There's a bigger drawback to rolling the money over yourself, however: Your company will have to withhold 20% of your check for taxes. The only way to get this money back without paying early-withdrawal penalties is to open your Rollover IRA, deposit your check, and make up the 20% difference out of your own pocket. Only after you've deposited the full amount of your plan disbursement can you get that 20% returned. Here's the process you'll need to use to rollover your account: If you want to roll over a company retirement plan to a traditional IRA, you'll need to contact your company's HR department to obtain a form to do a "direct rollover." You'll need to have established a traditional (or "rollover") IRA at any brokerage you choose to receive the proceeds from your company plan. Your company will either transfer the funds electronically to your IRA account or send you a check made payable to the new custodian; the funds, in turn, can be deposited into your IRA account. If you roll over to a traditional IRA, you will have to start taking required minimum distributions at age 70 1/2. Once your money has rolled over to an IRA, you can invest in just about anything--stocks, bonds, mutual funds, CDs, etc. Company Stock and After-Tax Contributions If you own shares of your company's stock in your retirement plan that have appreciated, you have a couple of options. You can either roll over the company stock to the IRA or take out the shares and pay tax on the "basis" of those shares. The basis is the amount your company originally paid to buy your shares. There are a number of tax advantages and disadvantages associated with both options. We recommend you talk to a financial advisor or tax expert before making a decision. If you have made after-tax contributions to your company retirement plan–either through a Roth 401(k) or some other means–you can roll those assets over to an IRA, too. You'll need to file Form 8606 to let the IRS know that you've already paid tax on those dollars. The IRS treats these contributions similarly to nondeductible traditional IRA contributions.								> Home > Glossary > Support

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