How to Move Funds from a Qualified Retirement Plan to a Traditional IRA

Financial planning for your retirement is a necessity. Knowing what investment instruments can maximize your savings can provide priceless peace of mind. Follow these steps to learn one of those methods: moving funds from a qualified retirement plan to a traditional IRA.

Difficulty: Moderately Easy

Instructions

1. Determine if you are eligible for a rollover of your qualified retirement plan to a traditional IRA. To qualify, you need to be leaving the employer that sponsors your qualified retirement plan. You can retiring or quit. You can even be fired.

2. Learn if a rollover is your best option. Study the benefits. Your funds can grow on a tax-deferred basis. If the company you're leaving is in financial turmoil, or it's restructuring, it may be smart to cash in your stock. Reinvest your funds with more security.

3. Understand the differences between a traditional retirement plan and an IRA. Usually, retirement plans have higher maintenance expenses. With an IRA, it's easier to track your earnings. Plus, you can control the access to your funds.

4. There are many benefits for rolling over your qualified retirement plan funds into a traditional IRA. Still, you should first consider the circumstances that undermine those benefits. If you have outstanding loans against your retirement plan and try to rollover funds, you may be taxed on the loan amount you have not paid. If your company uses a SIMPLE plan less than two years old, you will have to pay a penalty for your new IRA. If you're in the middle of a bankruptcy, moving your money can put it at risk.

5. Find a traditional IRA program you want to use. Research various IRAs online. Most banks offer some form of IRA program. Start your search at your own bank. Talk with a representative. You can also view online IRA program information for other banks and investment institutions. Select an IRA program with low maintenance fees as well as the most benefits and perks.

6. Fill out an application. Complete all necessary paperwork. The amount of paperwork you need to complete depends on the practices of your former employer. You may have to fill out forms that give permission to transfer your funds. In addition to the forms your former employer requires, you will also need to fill out an application with the company handling your IRA. Generally, those applications can be found online. Or, you can request them.

7. Wait for the paperwork to be reviewed, approved and processed. Your funds will then be transferred.

8. Check your mail. Once your funds are in your IRA account, you will receive a confirmation letter detailing the transaction. Included will be instructions on how to make deposits into your account. You may also receive other investment information.

9. Confirm the information you receive. Make sure there are no errors in the spelling of your name, your social security number or other identifying numbers. If you find one, make sure you notify the institution holding your IRA as soon as possible. This will help you avoid future problems with the IRS or future withdrawals.

Tips & Warnings

• Make sure an IRA account is the right option for you before you open one.
• Shop around for the best IRA accounts.
• Don't be shy! Ask your account manager about the performance of your IRA. Find out how to request changes in your account's investment strategy.
• There are tax advantages and disadvantages for both qualified retirement plans and traditional IRA accounts.
• Not everyone is in the best position to move their money.