Rollover vs. Recharacterization

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Rollovers and recharacterizations can only be performed on certain types of accounts. Find out more about rollover versus recharacterizations with help from a personal finance expert and professional in this free video clip.

Part of the Video Series: Personal Finance & Life Insurance
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Video Transcript

Hi, this is Walter Pardo. I am managing director and founder of Wealth Financial Partners and WFP tax partners in Basking Ridge, New Jersey. Today we're going to discuss rollover versus re-characterization. The main difference between a rollover and re-characterization is that a rollover can be done from an IRA to an IRA, an IRA to a Roth IRA, a Roth IRA to a Roth IRA. So a rollover is simply moving money from one to the other. Re-characterization is different and only specific to an actual Roth IRA. So when a person converts from a regular IRA over to a Roth IRA they have the option if they did it from an IRA to a Roth to re-characterize. Re-characterization simply means I'm going to put it back into a IRA and the difference between an IRA is money that I haven't paid taxes on. The Roth means that I'm paying taxes now so the money grows tax free. So that is the main difference between the rollover versus the Roth re-characterization.

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