How to Roll Over Assets Into a Traditional IRA

Should you leave your current job or if you are now ready to retire, you may need to roll over retirement assets into an Individual Retirement Account, or IRA. Rolling over these assets makes good financial sense, because doing so shelters the money from taxes and penalties while allowing you to continue making tax-deferred financial contributions toward your retirement.

Instructions

1. Make sure you are eligible to roll over your assets into an IRA. The administrator of your current plan can provide you with this information, or you may choose to consult with an accountant.

2. Choose a broker. Before making the final decision to roll over your assets, consult with a few brokers to determine which one is right for you. Some brokers can offer you great benefits, like no start-up fees or discounts on other services when you choose to roll over your retirement account with them.

   Don't feel pressured by a big sell; simply choose the one that offers the best benefits for your individual needs.

3. Educate yourself on current rules. Although most rollovers into a traditional IRA are tax-deferred, there could be other tax liabilities down the road. Making sure you are prepared for this with a tax plan will prevent future surprises that could prove financially disastrous.

4. Complete your account transfer forms. There may be quite a few pages to fill out. If you encounter anything on the forms that you don't quite understand, be sure to ask your broker. Sign and date the papers and ensure that your broker does the same. You may also need to provide a copy of your last month's account statement so your broker has it on file.

5. Fund your IRA account. Your broker will tell you exactly how to do this. Some accept certain checks, electronic funds or wire transfers to fund your new IRA account. Choose the method most convenient for you and sign any additional paperwork (such as an authorization for the transfer) if needed.

Tips & Warnings

• Once you have opened your traditional IRA account, you can assess your financial situation more efficiently. You may even decide to eventually roll over some of those funds into a Roth IRA. Depending on the type of rollover, you may have to wait up to 60 days after your initial transfer to complete another. Always ask questions. Being aware of any potential penalties or liabilities in advance is essential when making important financial decisions.

• Watch the deadline. If you don't participate in a direct rollover and the money is paid out to you first, you have 60 days to deposit the funds into an IRA. If you pass the 60-day mark, the money is looked at as regular income by the IRS, and appropriate taxes must be paid. Rollovers from one IRA to IRA have certain limits as to the number of rollover transactions that are allowed in a given time frame. If you are simply changing financial institutions, it is best to use the transfer method instead of a rollover. Transfers do not have to be reported, and are not limited to a certain number of transfers during a period of time.