This article is contributed by Deadra Plessner.
These days, very few people can expect to spend the entirety of their career years with the same employer. However, that doesn’t mean they can’t start planning for their retirement, and right away. The trick is to devise a retirement plan that will move with you from job to job. If you are planning on switching jobs any time soon, then you need to make sure you know how the Rollover IRA works:
What is a Rollover IRA?
A Rollover IRA is the same thing as a traditional brokerage account, only the funds that go into a Rollover IRA are funds that are moved from a retirement account with a previous employer. Basically, if you start a new IRA with funds from an old retirement account, you are creating a Rollover IRA.
Know your time frame.
While Rollover IRAs are a great way to preserve the retirement account money you spent years growing with another employer, they are also a risky choice if you are not especially conscientious of the time frame you have to work with. You have only 60 days to deposit the funds from your old retirement plan (a 401k, for example) into your Rollover IRA; if you do not do this in time, you will be penalized with a considerably steep tax bill.
Why a Rollover IRA?
You may wonder why you would choose to deposit your retirement money in a Rollover IRA, rather than just re-invest in the traditional retirement program offered by your new employer. There are some great advantages offered by the Rollover IRA.
First of all, when you invest in a Rollover IRA, you get to choose which investments your money goes into, whereas with an employer-sponsored retirement program, your money goes wherever is dictated by the program of your employer’s choosing. Additionally, opening a Rollover IRA account is fairly simple and straightforward, Rollover IRA terms are generally more flexible than traditional employer-sponsored retirement account programs, and you may even be able to get a cash-back incentive for starting a Rollover IRA account.
What are the disadvantages to a Rollover IRA?
While some people think it’s great to have a lot of choices, all of the investment options that come with a Rollover IRA can be a bit overwhelming if you don’t know a lot about investing. Additionally, you only have one opportunity per year to take advantage of a Rollover IRA.
As you can see, there is a lot to think about when it comes to deciding whether or not a Rollover IRA is for you. Keep all of these considerations in mind when weighing out your options.
Deadra Plessner is currently switching jobs and working on rolling over her IRA. When she’s not working, she loves to watch suretrader
updates, follow financial experts, and plan changes to her own portfolio.
: your money goes in taxes image courtesy of DonkeyHotey
via photopin cc