What is a Rollover IRA?

Date October 11, 2016

Leaving your job? Take your retirement account with you.

When you retire or change jobs, you have lots of decisions to make. One of the most important is: what will you do with your retirement account?

Basically, you have four choices:

  1. Leave the money where it is (probably not your best option). Your investment choices may be limited, and you may be over-weighted in company stock. If you switch jobs several times, you could end up with a hodge-podge of retirement accounts that are hard to keep track of.
  2. Arrange an indirect rollover (not a good idea). In an indirect rollover, you take the money out of the account, minus 20% for tax withholding. You have 60 days to establish a new account. But there’s a catch. You have to contribute the entire original amount, making up the 20% difference from your own pocket. You’ll recover the 20% at tax time, but handling a rollover this way is complex and a bit risky.
  3. Cash out your account (really bad idea). You will probably have to pay taxes and penalties, and you’ll lose out on future tax-deferred earnings. It may be tempting to take the money and run. But we’ve got three words of advice: don’t do it.
  4. See us for a rollover IRA (now you’re talking!). Most financial institutions that offer IRAs (like MCCU!) can arrange a direct rollover into a Traditional IRA. It’s simple, flexible and convenient. Your money will be safe and sound at a financial institution you know you can trust. And if you prefer a Roth IRA, we’ll convert it for you. No problem.


For more information simply call MCCU at 818.993.6328 or stop by one of our branches.

We will be happy to evaluate your current situation and arrange the accounts you need.


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