How to Best Invest Retirement Rollover Money
Rolling over your retirement assets is an important matter. Whether you're rolling your money from your employer-sponsored qualified plan to an IRA or to another plan, you must decided how to allocate your assets. Learn how you can best invest your nest egg to fit your investment objective.
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Instructions
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Open a rollover IRA account or have a new employer plan to move your assets into. Once your assets have been transferred to the new account, you can make any changes in your portfolio that you need. You can choose whether to roll your assets over in-kind or as cash. If your investment objective is changing, you may want to consider the latter alternative.
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Look to bonds and other fixed-income alternatives if you plan to start taking distributions now. U.S. government bonds and agency securities are the safest alternatives but will pay the least. Corporate bonds have a greater risk of default but pay higher rates of interest. Municipal bonds are not appropriate choices for a tax-deferred savings plan because their tax advantages will be lost.
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Invest in growth instruments if you intend to let your portfolio grow for the foreseeable future. Stocks and stock mutual funds are excellent choices in this case. Research your investments carefully before you buy them; you want your portfolio to grow over time without undue risk and volatility.
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Try a combination of growth and income investments if you're not quite sure which way you want to go. There are many growth and income funds available that invest in both equity and fixed-income investments, and you can also create your own portfolio to match your personal investment objective. A combination of blue-chip stocks and corporate bonds or bond funds might be a good combination if your risk tolerance is moderate.
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Write covered calls on stocks you own inside an IRA account (but not inside a qualified plan.) This is a fairly simple way to generate additional tax-deferred income inside your IRA. In fact, IRAs are often considered the best place to do this, because if you get called out of your stock, there will be no taxable capital gain to report.
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Consider a variable annuity because most insurance carriers now offer living income benefits that will pay out an income stream based on a guaranteed rate of return, such as 7 percent. Regardless of how your portfolio performs, you will then receive a distribution based on the guaranteed rate of growth. If your actual contract is higher, you will receive a payout based on actual value instead.
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Tips & Warnings
This article is intended to be purely educational in nature and should not be construed as investment advice.
