Tips for Rollovers and Withdrawals from Employer Retirement Plans and IRAs

Have you recently changed jobs or retired?  Not sure what to do with your retirement savings plan?  If so, we suggest completing either a direct transfer to your new job’s retirement plan or requesting an IRA rollover – a common and useful financial move – so you don’t leave your money behind.

Rollovers between workplace retirement plans, IRA-to-plan rollovers, and plan-to-IRA rollovers, where the investment company simply sends a check for the assets to the brokerage firm that will eventually receive them, are exempt from a 60-day deadline imposed by the IRS.  Also, there is no tax or penalty assessed when performing these types of transfers.  They simply allow you to stay in control of your money and consolidate similar tax-deferred accounts.

A direct rollover of retirement assets is routine, and can be initiated with phone call or even online through your retirement plan’s website.  However, there are times when an indirect rollover is necessary or more efficient.  You just have to be mindful of the 60-day rule and the potential ramifications of missing the deadline. We encourage you to give Kendall Capital a call if you would like help deciding which method best meets your goals.

Do you need to borrow from your IRA?  If you happen to be in a situation where you need cash quickly but for a short period of time such as settling on a real estate deal or paying taxes, you are allowed to take a withdrawal from an IRA with no tax or penalty before you turn 59 ½. The catch is that you must return those funds within 60 calendar days or else the amount withdrawn will be subject to that penalty and treated as ordinary income for tax purposes. Therefore, it is in your best interest to return as much money as possible, if not the full amount. Keep in mind though, the IRS only lets you take advantage of this opportunity once every twelve months.

A second option to garner some quick cash is taking out a loan from your 401k plan. There will be limits on how much you can borrow from your 401k balance so you should call your 401k plan provider to learn the details.  Here again, this should be a short-term loan since while you’re paying yourself back, you’re not adding anything more for your retirement.  Also, keep in mind that if quit or lose your job, the balance of your loan will be considered taxable income and be subject to that 10% penalty if you’re under 59 ½ years old.

If you are considering a rollover or withdrawal from an IRA or employer retirement plan, give Kendall Capital a call to discuss the best option for your financial future.