What Should I Do If My Rollover IRA Is Losing Money and I No Longer Fund It?
Your account trustee may call it a "rollover" IRA, or individual retirement account, but there is technically no such thing. Amounts you roll into an IRA from another IRA or an employer-sponsored plan, like a 401(k) or 457, are subject to almost all the same rules as direct IRA contributions. The good news is that, according to the rules, there is nothing to prevent you from rolling over a rollover IRA as many times as you please.
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Significance
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Rather than think of an IRA as a financial product, think of it as a tax-sheltered storage container for your retirement assets. You can use money you contribute to an IRA to purchase many types of traditional and nontraditional investments. For instance, you can buy stocks, bonds and mutual funds or you can invest in real estate, a business start-up or even gold.
Types of IRA Trustees
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Your IRA trustee determines the type of financial products you can purchase in your account. Many different types of financial institutions are IRA trustees, including banks, brokerage firms and mutual funds. You can also open an account with a self-directed IRA trustee who allows you to invest in things other than securities, including real estate. If you are not satisfied with your current trustee's offerings, IRS rules allow you to transfer your account to a new trustee.
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Managing Your Assets
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As long as you understand that you are under no obligation to keep money-losing investments in your IRA, you have many options. You can find an IRA trustee who offers stocks or mutual funds that are better performers. If you don't want to think about it, you can park your IRA funds in a CD, or certificate of deposit. If you close the account, however, the IRS charges you a 10 percent early withdrawal penalty if you are not yet 59 1/2 years old.
Making a Rollover
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If you decide you want to move your IRA to a new trustee, the IRS gives you two options. You can withdraw the money yourself and redeposit it in a new account within 60 days. You can also have your current trustee directly transfer the money to your new account. Both methods allow you to transfer money without incurring the IRS's 10 percent early withdrawal penalty.
Rollover to an Employer Plan
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The IRS does allow you to roll your IRA into an employer-sponsored plan. For instance, if you have a rollover IRA from a previous job and also contribute to your current employer's 401(k), you may be able to roll your IRA into your 401(k) if your employer's plan rules allow it. This may save you the trouble of managing two accounts, but bear in mind that once you move your IRA into a 401(k), you probably won't be able to move it out again until you are 59 1/2 years old.
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