Foremost, to avoid taxation. When you become eligible for these benefits, you can access the money immediately, and pay tax penalties OR you can choose an IRA rollover. With the rollover option, your benefits are tax-exempt. And you will continue to grow these assets. Your retirement fund grows faster since it is not taxable and you are not required to report your yearly investment income or capital gains. If you want control of your retirement savings, a rollover takes the control from an employer plan and gives you the ability to make the decisions about your money. You decide when to take distributions, and how much to take. You might opt for a tax-free Roth instead of a Traditional IRA, changing the income in your retirement account. How you handle your account is up to you. With sound advice, careful planning, thoughtful management and smart investing your IRA Rollover can be a great asset that works for you. Remember, the transition should be simple and straightforward, but if you experience any difficulties you can seek technical advice from your tax advisor.

Changing Jobs?

The average American stays in a job 2-4 years, and will change jobs/careers 7-10 times in their working life. It’s become vital to hold on to and maintain your retirement plan through these career transitions. In an IRA plan, your assets are safe from taxation and penalties. Remember how the IRA works and safeguard your future retirement. If you have a mere $2000 tax deferred at 8%, in 30 years that can grow to $20,000 without any additional contribution. You should consider the options and retain control of your future. A simple rollover will transfer the money in your retirement account to your personal IRA. The investments are chosen and controlled by you, not an employer. Your money continues to work for you even if you experience several career changes.

Do Your Homework!

Not all IRAs are equal, so be sure to choose an institution that will meet your needs and give you the level of service you expect and deserve. Transfer your IRA to a custodian with a good track record; one that allows you the freedom to carefully manage your investments and grow your assets to their maximum potential. Making a careful choice of custodian can mean a significant difference in your returns. Always be aware of small-print to avoid taxes and penalties. A careful and precise transfer assures you retain the tax-deferred status on your assets. Ask for guidance to avoid any errors in the transfer that could jeopardize your assets or cause unnecessary penalties and losses.

Divorce?

IRA retirement plans are classified differently during divorce proceedings. Typically, they are part of a Qualified Domestic Relations Order (QDRO) and should be documented to specify that assets will be paid to a spouse as an alternate payee. The spouse will be allowed to forward the assets to his/her IRA. IRAs fall under the court-approved divorce decree or in a separation, under the legal separation agreement. Your divorce attorney should be able to answer your questions and advise you on steps to take to safeguard your retirement accounts. Have this clarified and documented before final hearing.

Death

It’s a difficult time for your family, and may be confusing to have to deal with financial decisions so soon. Some decisions must be made in a relatively short time in order to preserve the assets and avoid loosing tax benefits. A qualified financial expert can help you sort through the options and give you clarity on how to proceed. If you are the beneficiary of a retirement plan or IRA from someone other than your spouse, you need to know the rules regarding your taking distributions from the account. The safest way to preserve the assets and assure that they continue to grow is to simply leave the funds within the IRA and take only required distributions. The Internal Revenue Service allows you to take these distributions over the course of your life expectancy. As long as you take your first distribution within a year of the death of the original IRA owner, you will have less taxable income yearly. When you take your first distribution, you will owe taxes on that amount. If you have been willed an employer-sponsored retirement plan, instead of an IRA, you can use the Pension Protection Act of 2006 to roll the retirement plan assets into your own IRA. Seek advice and follow the rules to avoid taxes and penalties.

Understanding IRA Types

The Employee Retirement Income Security Act created IRA’s and was developed by Congress in 1974 in order to allow citizens to save money for their retirement. The act has been modified numerous times over the years, adding more benefits, but also tightening restrictions. There are several IRA types – Individual Retirement Plans – that we will explore here.

Contributory IRA

Simple and straightforward. With this type, you contribute from your income earnings. Each year the contribution levels allowed may change, but those over 50 years of age are allowed to contribute an additional amount in order to “catch up’’ for their retirement.

Rollover IRA

With this type, you create a new IRA through the transfer of assets. The transfer can be from another IRA or from an employer-sponsored plan. The assets within the new plan remain safe and tax-deferred as long as the transfer is satisfactorily completed within 60 days.

Roth IRA

These will differ depending on circumstances and your own particular situation. For surviving spouses, the IRA can become their own and would be considered a rollover, allowing the spouse to continue contributions. Non-spouses who inherit an IRA have a different scenario. The IRA is an inherited IRA, and no additional contributions are allowed.

Job IRA

Your employer has a retirement plan you can participate in. Ask to learn if they include IRA’s in this benefit plan. The employer should give you specific details on your retirement plan.

Getting Ready to Do A Rollover

After researching companies, this will be easily accomplished. Select your receiving IRA custodian. That custodian will provide you with the necessary forms and instructions to set up your new IRA rollover account. Upon completion of the paperwork, your assets are placed in the rollover account for you to invest as you choose. The Internal Revenue Service requires all IRAs held by an authorized custodian in order to accurately collect taxes on distributions. It’s vital you find a custodian that meets your service and product education needs so you can make the right choices for your asset growth. Consider the investment options offered by each potential custodian. You may wish to choose a custodian that allows you unlimited investment options, rather than one who will only sell you a limited number of funds and stocks from their own family of products. Be aware of IRA fees for processing and handling. Check with the custodian to know in advance about charges for sales, expenses, and transactions. Minimal fees will ensure higher returns for your portfolio. If you want more guidance on investments and the taxes/fees involved with distributions, be sure you’ve chosen a custodian who will help you through the process and answer your questions. Some service levels cost more initially, but can help you avoid taxes and penalties, as well as give you peace of mind.

Choosing Wisely - Investments for your IRA

This is the big one! Better investments mean more returns, and a safer and more secure retirement. It’s pretty simple: a $10,000 (example) in an IRA rollover at a fixed 5% rate, compounded annually, will give you $45,000 for retirement in 30 years. But what if you started with the same $10,000 base and had an 8% return? Over the same 30 years, you would have $109,000. A higher return can make a huge difference. It’s basic wisdom to balance your portfolio. The market and economy have been subjected to many changes recently. Stocks aren’t producing as well as they have in past years. Reallocating your assets can help you take advantage of market trends. Tactical asset allocation gives you more freedom with these assets. With an investment in a PropertyNvestors real estate fund, for example, you may enjoy a fixed return plus additional dividend, diversification across many types of properties, and having the peace of mind that your funds are secured by assets covered by insurance.

Non-Allowable Investments

Occasionally, investors try to use IRA funds for assets that are considered by the Internal Revenue Service as luxuries. These are not allowed and will be considered by the IRS as distributions. The IRS has created a “Prohibited” list to help you stay clear of this issue. Taxes and penalties are applied to anyone using their IRA to invest in what are considered collectible and prohibited items. These include:

• Artwork
• Rugs
• Coins
• Stamps
• Antiques
• Gems, jewelry and metals
• Wine, alcoholic beverages
• Other tangible personal property

The exception may be US Treasury Minted Coins. Gold and silver coins, as well as some gold, silver, and platinum bullion are considered allowable for IRA investing. Consult your custodian if you have an interest in these investments to see if they offer them as an option. Remember, too, you are forbidden from borrowing money from your IRA, selling property to it, receiving unreasonable compensation as the manager of it, using your IRA as loan security, or buying property now or in the future for personal use with it. In spite of the restrictions on what you can do with your IRA, there are numerous investment options that you can explore and choose to grow your assets. Your retirement will be secure with safe and careful investments.

Your IRA Distributions....How? When?

There are stringent rules that govern the distribution of IRA funds, with penalties that apply to early withdrawals, or premature distributions. If you don’t take the distributions correctly, it can affect Required Minimum Distributions (RMD’s.) For example, when you reach an age of 70 ½, you are required to begin taking minimum required distributions. This allows the Internal Revenue Service to be paid the long-deferred taxes on these assets. Failure to comply can cost you as much as 50% in penalties. IRA distribution rules can be confusing. Get the advise you need in order to avoid extra taxes or penalties a mistake could cause. Some basic guidelines:

Before Age 59 ½

There will be a 10% penalty and appropriate tax on the distribution amount

Age 59 ½ to Age 70 ½

No penalty on distribution, but appropriate taxes levied on distribution amount

Age 70 ½

Required Minimum Distribution must begin now. No penalty unless you under-withdraw. Under-withdrawals are subject to a 50% penalty. Taxes still apply to distributions.

Inheritance IRA

Age does not apply here, but required minimum distributions must begin the year after the original IRA holder dies. These distributions are subject to income tax.