IRA Rollover: Direct Rollover or Indirect Rollover

Direct rollovers incur not taxes or penalties. Indirect rollovers are complex and can incur a 20% withheld tax penalty. Follow IRA rollover chart rules.

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IRA Rollovers: Direct Rollover or Indirect Rollover

Powerpoint slides on a superior retirement planning strategy called Roth IRA on Roids which allows for tax-free distributions, tax-free growth, guaranteed principal and guarateed death benefits.In simple terms, a rollover is a method of moving money from one type of retirement plan to another. This can be done without paying taxes or penalties. There are two ways to complete a rollover: indirectly and directly. A direct IRA rollover allows you to move money from a current IRA plan or an employee sponsored retirement plan, such as a 401(k), to a new IRA retirement account.

This type of rollover is the easiest and will not incur any taxes or penalties. An indirect rollover can be more complicated. With this type of rollover, you take the money from the initial retirement account and then deposit it into a new account. There are some drawbacks with this type of rollover. First, you have to wait 60 days from when the first account is closed and you receive the money. Also, there will be 20% withheld for taxes when you take the money from the account. You may get this amount back when you file your taxes, as long as you follow the correct steps and abide by IRA rollover chart rules. When you do an indirect rollover, you are required to deposit the entire amount into a new IRA. This means that you must find a way to come up with that 20% that was taken in taxes. If you do not perform the rollover within the 60 days, you will be subject to further IRA penalties and taxes.

A direct rollover is the best option. The process is much faster than with an indirect rollover and you will not incur penalties. However, the only way to do a direct rollover is if you already have an IRA open. If you do not, you will have to opt for the indirect rollover and open a new IRA account to deposit the money into. Make sure this transaction is completed within the allowed 60 days.

IRA Rollover Chart Rules

When you have made the decision to do a rollover, you must be aware of the rules associated with the rollover. For example, certain IRA accounts may not be rolled over to some types of accounts. You must know exactly what is allowed to perform a successful rollover and avoid paying additional taxes and penalties.

Most people will choose to rollover their retirement accounts to a traditional IRA or a Roth IRA, provided you meet the eligibility requirements for a Roth IRA. This is the most common rollover method. If you currently have an IRA account, the process is fairly simple. A traditional IRA can be rolled over to a Roth IRA with no penalties. In addition, if you leave your current employer and have a 401(k) or 403(b) account, these can also be rolled over to the Roth IRA. If you do not currently have an open IRA account, you will need to open one to perform any type of rollover.

A rollover is commonly used when you leave your place of employment and wish to continue saving for retirement. A 401(k) rollover to an IRA is allowed. You can take the money that is in your retirement plan at work and rollover the amount into an IRA to continue saving.

The IRS has issued a chart that explains what rollovers are allowed. It can be seen here: http://www.irs.gov/pub/irs-tege/rollover_chart.pdf. This IRA rollover chart rule can be used to determine if you are eligible to rollover your current retirement account to a new type of account.

Rocco Beatrice, CPA, MST (Master of Science in Taxation), MBA (Master of Business Administration), BSBA (Management/Accounting), CWPP (Certified Wealth Preservation Planner), CMMB (Certified Mortgage Broker), CAPP (Certified Asset Protection Planner), Managing Director, Estate Street Partners, LLC. Mr. Beatrice is an asset protection, award-winning trust, estate planning and tax expert.

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