Rollover Retirement Plan


There are a large number of retirement tools available in the financial market today and therefore this means greater confusion for the common man who does not have a detailed knowledge on financial matters. Are you getting close to your retirement day? Are you sure that the investment plans you have made will help you lead a life that is as easy as the one you have when there is a constant flow of money in your account? Do you think that a change in financial planning is required if you have to maximize your monetary gains in the post retirement years? A roll over may be the answer to your problems. Therefore, invest in a rollover retirement plan and maximize your retirement benefits. The term rollover plan after retirement signifies the distribution or shift of your cash and other assets from an existing retirement plan to another plan which you think is more suitable to your needs. Since you are changing your retirement policy using this plan, the rollover plan is also sometimes referred to as the conversion retirement plan.

Why choose a Rollover Retirement Plan?

Why should you opt for another retirement plan when you have already invested money in one? There are certain points to keep in mind while contributing to a second retirement policy or while investing in a rollover contribution:

  • When your retirement planning involves a rollover contribution, remember that you do not have to pay taxes on the shift in investments and the contribution is also added to the savings for your future. When investments can grow along with an exemption of taxes it is always wise to invest in such a policy.
  • Sometimes rolling over your retirement policies is important because if you do not do so it may lead to you paying taxes on the amount of money that you received and in some cases also paying on the additional tax imposed on previous distributions.
  • If you are below 55 years of age and your retirement account has just issued a distribution, you will have to pay a 10% tax on the distributed amount. But with a rollover retirement plan, you will be exempted from paying the additional 10%.


What You Can and What You Can’t Roll Over

Rollover retirement plans can be availed by anyone who wants to withdraw savings in the form of cash or any other asset from one retirement account and transfer them to another. This type of transaction has to be completed within 60 days from the day you have withdrawn your investments. A rollover transaction can be done on any type of distribution from your existing retirement account barring a few such as:


  • The part of your distribution that is non-taxable. A prime example in this case is the after-tax contribution to retirement policies.
  • That part of the distribution which is included in the payment made on the basis of one’s life expectancy or the life expectancy of a beneficiary.
  • The distribution that is paid over a time span stretching to ten or more years
  • Hardship and required minimum distributions
  • Dividends that are paid on the employer securities
  • The cost that is involved in covering a life insurance policy
  • Any loan that is given the same treatment as a distribution


How to roll over your current retirement plan

There are some basic instructions that you must keep in mind while rolling over from an existing to a new retirement or pension plan. It is advisable to include the concept of rollover in your retirement planner, but how you go about doing that is more important. Here are the key steps to remember:

  • Evaluate details before rolling over – Withdrawal from present pension plan and creating a new plan requires advice from a financial expert. To know the rules, pros and cons, it is important that you contact an administrator or get them checked for yourself in brochures or websites. Most policies do not allow a rollover before you have attained a certain age, your retirement age in most cases. Keep such facts in mind.
  • Withdraw after rounding up on new plan – First decide on which retirement plan you want to switch to before withdrawing distributions from your current plan. It is advisable that you read the rules underlined in the IRS guide to get an idea on which retirement plans to invest in after a rollover. Even though you have gained a fair idea after reading the IRS guide, take the help of a financial consultant before deciding on your rollover retirement plan.
  • After you have decided on the rollover plan it is important for you to open a new account where you will shift the distributions to before actually withdrawing these distributions from your older plan.
  • Also remember to fill up the forms provided during such conversions with care. If needed, consult your legal advisor or an experienced financial advisor before filling up the form as you have to be very accurate with details.
  • It is a thumb rule to invest your complete withdrawal in the new account within a span of sixty days. But sometimes a number of hassles may arise in the process even after you have transferred the complete amount. Do not worry if the rollover process takes a couple of weeks to complete. But don’t forget to keep a check on the rollover process and ensure that all assets have been effectively liquidated and rolled over.


Tips for a successful Rollover Retirement Plan

Lastly, there are two very important tips to remember in the case of a rollover retirement plan:

  • The first tip says that make the rollover retirement planning program only after you have chalked out a detailed and effective financial plan taking the help of a professional. Your planning should include areas such as personal insurance needs, all kinds of taxes and estate planning.
  • The second and most important tip is that rollovers are always made in cash. Thus if a pension investment is liquidated at a very low price, the return from the rollover will also be low. Therefore always opt for partial rather than complete rollovers at a time or you can wait for prices to rise before rolling over your retirement investments.