What is a direct rollover?
A direct rollover is the tax-free transfer of qualified retirement plan assets (401(k), pension, or profit sharing account) or a 403(b)(7) account to a traditional IRA. This is one of your options for your retirement plan when you leave your job.
How many days do you have to roll over a distribution from an IRA?
Once you take a distribution from an IRA, you have 60 days from the date the distribution is received to complete a rollover into another IRA or other qualified retirement plan. This is referred to as an indirect rollover.
How many rollovers may you complete annually?
The IRS limits the number of indirect rollovers to one rollover per IRA per 365 days.
How many direct transfers may you complete annually?
A direct transfer is the movement from one qualified retirement plan or IRA directly to another retirement plan or IRA. The IRS does not limit the number of direct transfers you may do.
If you change jobs or retire and take a cash distribution from your 401(k) account, what are the consequences?
Your employer will withhold 20 percent for federal income taxes on the portion of your 401(k) that is eligible for rollover (if your distribution amount is $200 or less). If you do not rollover your retirement assets, they will be taxed as ordinary income. In addition, if you are under age 59½, your distribution will be subject to a 10 percent federal early distribution penalty as well as a possible state penalty.
I took a distribution from my 401(k) account, but I invested it in an IRA within the 60 day time limit. When I took the distribution, my employer withheld 20 percent. How can I recover that amount?
Your former employer cannot return that money to you. The only way to recover that 20 percent is to claim it on your federal tax return.
Can I roll my 401(k) into a Roth IRA?
Typically, contributions to a 401(k) or other qualified retirement plan are pre-tax. The only contributions that can be made to a Roth IRA are after tax. Therefore, proceeds from a rollover can only be placed in a traditional IRA. Once you have completed your rollover and opened your traditional IRA, you can convert it to a Roth IRA.
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