Its Time to Rollover, What are the Rules?

Its Time To Rollover

If you have been recently laid off or are otherwise leaving your current employer, you will need to rollover your retirement plan money to a new plan. It is important to understand what your current retirement plan is, in order to know which type of plan you can roll your money into.

The most common rollover is the 401(k) to traditional IRA rollover, but as you can see from the chart below, there are actually several other types. The are pros and cons to each type of retirement plan so before you rollover, be sure to consult a financial advisor on the different rules, advantages, and limitations.

Rollover Guide Chart

  1. Required distributions and nonspousal death benefits can't be rolled over.
  2. In general, if you make a tax-free rollover from a traditional IRA, you can't make another tax-free rollover from that same IRA for one year. (This does not apply to direct (trustee-to-trustee) rollovers.)
  3. Taxable conversion. Income limits apply.
  4. Nontaxable conversion. Income limits apply.
  5. Only after employee has participated in SIMPLE IRA plan for two years.
  6. Required distributions, certain periodic payments, hardship distributions, corrective distributions, and certain other payments can not be rolled over.
  7. May result in loss of qualified plan lump sum averaging and capital gain treatment.
  8. Direct (trustee-to-trustee) rollover only; receiving plan must separately account for the after-tax contributions and earnings.
  9. 457(b) plan must separately account for rollover--10% penalty on payout may apply.
  10. Nontaxable dollars may be transferred only in a direct (trustee-to-trustee) rollover.
  11. Subject to income limits in 2008 and 2009. Taxable dollars included in income in the year rolled over.
  12. Subject to pending Pension Protection Act of 2006 technical corrections; otherwise may be subject to income limits in 2008 and 2009.