Planning Your Retirement With An IRA Rollover

By Rich Regalas

When owning a company, there are always important choices to consider in order to secure your future. You spend all your working years saving for retirement, and probably have a majority of your savings in your company 401(k) plan or other retirement plan. When you exit your business, you will need to decide what to do with the assets in your retirement account. One viable option may be an IRA rollover.

Typically, if you withdraw money from your retirement plan, you must withhold 20% for taxes (if the distribution is made out in your name). Then, if you choose to reinvest the original amount in another fund, you'll have only 60 days to make up the difference. You can avoid this required withholding by directly rolling over your retirement funds to an IRA. In this situation, the payment is put straight into the financial institution that will hold the IRA . With this method, you can potentially avoid penalties and taxes.

With an IRA rollover, you can continue to take advantage of tax deferral. In deferring taxes, it can greatly increase your retirement account's balance by the time you exit. Also, it is possible that you could be in a lower tax bracket when you exit the workforce. This is an additional benefit of deferring your assessable income.

A rollover IRA will provide you with more investment opportunities than are available in your 401(k) account. You can invest in CDs, stocks, bonds, mutual funds, or exchange traded funds. Your professional team can help you diversify your assets, taking into consideration your goals and financial state.

Another advantage of an IRA rollover is that it allows you to later convert your investments to a Roth IRA. With this plan, you would only pay taxes on the amount transferred. Any earnings thereafter are tax-free if certain provisions are met. Additionally, if you keep your Roth account for five years you may be allowed tax-free withdrawals. In the event of death, disability or first-home purchases, you could evade the early withdrawal penalty. Of course, your original (Roth IRA) conversion amount can always be withdrawn without paying taxes.

Other choices include leaving your retirement investments in the original plan, or moving the investments into another plan (ei. if you choose to buy a new company, it could be shifted to that establishment's plan. Or, another alternative could be a cash distribution from the plan.

Therefore, meet with your professional team and get their input on the most viable way to shift your retirement investments. It can have a substantial impact on securing your future. By taking time to plan, you can help ensure a secure, worry-free future.

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