Rollovers of Retirement Plan and IRA Distributions Rollovers and Transfers Consider whether a rollover or transfer is appropriate for you. Managing your retirement investments can be simpler when they're all in one place. To make the move easier, we'll give you clear instructions, answers to your questions and access to a team of professionals who can offer guidance when you need it. We'll even follow up with your current financial institution, if necessary. Get Started With a Rollover or Transfer Cash out, roll over or leave 401(k) behind Rolling over an old workplace retirement plan, such as a 401(k), is easy with Bolt Global Business Solutions Cash out, roll over or leave 401(k) behind Your job is gone, your bank account is dwindling, and that pot of money sitting in your retirement account at your former employer is looking mighty tempting. But the financial penalties you'll likely incur for cashing it out make that a bad idea under almost any circumstances. You're better off either doing an IRA rollover or letting the money stay put. Option No. 1: Cashing out Option No. 2: Leaving the funds behind Option No. 3: Doing an IRA rollover Consult with the pros A separation from your employer can be a good time to step back and re-evaluate your retirement plan. A good financial adviser can help you sort things out while you decide what to do. As urgent as your financial situation may seem when you're unemployed, don't rush into a decision. "The No. 1 mistake that I see people make is that they panic," "Just slow down. You don't have to do these things in a hurry." If you have retired or changed jobs, you may have questions about what to do with the money in your employer retirement plan. You typically have four options: · Leave It– Leave the money in your former employer’s plan · Move It– Move the money to your new employer’s plan · Roll It– Roll over the money to an IRA · Take It– Cash out the account, subject to tax consequences Book Your Own Appointment, Click Here! 2017 401(k) & IRA Contribution Limits Bryan Pritchard January 25, 2017 2 Individuals & Families As I’ve gotten older (and wiser!), a lesson I learned early in life has really started to influence my financial decision making: the earlier I save, the more time my money has to grow. The concept isn’t overly complicated. Everyone knows the earlier you save, the better. The problem most have–myself included–is following through and putting money away for the future. But now that I’ve had a steady paycheck for a few years and have been focused on saving, I’m able to witness the growth in my account and I’ve got to say…I love watching my money make more money! Every two weeks when I receive my paycheck, I make sure I do two things: pay myself and then pay my bills. Now you may be asking yourself, “what does that mean?” but the concept of paying yourself first is simple: Before you pay your bills, before you buy groceries, before you do anything else, set aside a portion of your income to save. Put the money into your 401(k), your Roth IRA or your savings account. The first bill you pay each month should be to yourself. I always pay myself first by contributing to my company’s 401(k) and at year’s end, my own IRA, but the amount you can save changes annually. Every year the IRS mandated retirement plan contribution limits can change, so it’s important to know how much you can contribute. The IRS has released the 2017 retirement plan limits. Individual Retirement Contribution Limits for 2017 Plan Type 2017 Contribution Limit 401(k) $18,000 401(k) Catch-Up >50 years old $6,000 Traditional IRA $5,500 ROTH IRA $5,500 Traditional & Roth IRA Catch-Up >50 years old $1,000 Curious how much you may need to save for retirement? Try this calculator to get started. TC93603(0117)1 Book Your Own Appointment, Click Here! Most pre-retirement payments you receive from a retirement plan or IRA can be “rolled over” by depositing the payment in another retirement plan or IRA within 60 days. You can also have your financial institution or plan directly transfer the payment to another plan or IRA.The Rollover Chart summarizes allowable rollover transactions.Why roll over?When you roll over a retirement plan distribution, you generally don’t pay tax on it until you withdraw it from the new plan. By rolling over, you’re saving for your future and your money continues to grow tax-deferred.If you don’t roll over your payment, it will be taxable (other than qualified Roth distributions and any amounts already taxed) and you may also be subject to additional tax unless you’re eligible for one of the exceptions to the 10% additional tax on early distributions.How do I complete a rollover?1. Direct rollover – If you’re getting a distribution from a retirement plan, you can ask your plan administrator to make the payment directly to another retirement plan or to an IRA. Contact your plan administrator for instructions. The administrator may issue your distribution in the form of a check made payable to your new account. No taxes will be withheld from your transfer amount.2. Trustee-to-trustee transfer – If you’re getting a distribution from an IRA, you can ask the financial institution holding your IRA to make the payment directly from your IRA to another IRA or to a retirement plan. No taxes will be withheld from your transfer amount.3. 60-day rollover – If a distribution from an IRA or a retirement plan is paid directly to you, you can deposit all or a portion of it in an IRA or a retirement plan within 60 days. Taxes will be withheld from a distribution from a retirement plan (see below), so you’ll have to use other funds to roll over the full amount of the distribution.When should I roll over?You have 60 days from the date you receive an IRA or retirement plan distribution to roll it over to another plan or IRA. The IRS may waive the 60-day rollover requirement in certain situations if you missed the deadline because of circumstances beyond your control.IRA one-rollover-per-year rule You generally cannot make more than one rollover from the same IRA within a 1-year period. You also cannot make a rollover during this 1-year period from the IRA to which the distribution was rolled over.Beginning after January 1, 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own.The one-per year limit does not apply to:· rollovers from traditional IRAs to Roth IRAs (conversions)· trustee-to-trustee transfers to another IRA· IRA-to-plan rollovers· plan-to-IRA rollovers· plan-to-plan rolloversOnce this rule takes effect, the tax consequences are:· you must include in gross income any previously untaxed amounts distributed from an IRA if you made an IRA-to-IRA rollover (other than a rollover from a traditional IRA to a Roth IRA) in the preceding 12 months, and· you may be subject to the 10% early withdrawal tax on the amount you include in gross income.See IRA One-Rollover-Per-Year Rule for more on this limit.Which types of distributions can I roll over?IRAs: You can roll over all or part of any distribution from your IRA except:1. A required minimum distribution or2. A distribution of excess contributions and related earnings.Retirement plans: You can roll over all or part of any distribution of your retirement plan account except:1. Required minimum distributions,2. Loans treated as a distribution,3. Hardship distributions,4. Distributions of excess contributions and related earnings,5. A distribution that is one of a series of substantially equal payments,6. Withdrawals electing out of automatic contribution arrangements, 7. Distributions to pay for accident, health or life insurance,8. Dividends on employer securities, or9. S corporation allocations treated as deemed distributions.Distributions that can be rolled over are called "eligible rollover distributions." Of course, to get a distribution from a retirement plan, you have to meet the plan’s conditions for a distribution, such as termination of employment.Will taxes be withheld from my distribution?· IRAs: An IRA distribution paid to you is subject to 10% withholding unless you elect out of withholding or choose to have a different amount withheld. You can avoid withholding taxes if you choose to do a trustee-to-trustee transfer to another IRA.· Retirement plans: A retirement plan distribution paid to you is subject to mandatory withholding of 20%, even if you intend to roll it over later. Withholding does not apply if you roll over the amount directly to another retirement plan or to an IRA. A distribution sent to you in the form of a check payable to the receiving plan or IRA is not subject to withholding.How much can I roll over if taxes were withheld from my distribution?If you have not elected a direct rollover, in the case of a distribution from a retirement plan, or you have not elected out of withholding in the case of a distribution from an IRA, your plan administrator or IRA trustee will withhold taxes from your distribution. If you later roll the distribution over within 60 days, you must use other funds to make up for the amount withheld.Example: Jordan, age 42, received a $10,000 eligible rollover distribution from her 401(k) plan. Her employer withheld $2,000 from her distribution.1. If Jordan later decides to roll over the $8,000, but not the $2,000 withheld, she will report $2,000 as taxable income, $8,000 as a nontaxable rollover, and $2,000 as taxes paid. Jordan must also pay the 10% additional tax on early distributions on the $2,000 unless she qualifies for an exception.2. If Jordan decides to roll over the full $10,000, she must contribute $2,000 from other sources. Jordan will report $10,000 as a nontaxable rollover and $2,000 as taxes paid.If you roll over the full amount of any eligible rollover distribution you receive (the actual amount received plus the 20% that was withheld - $10,000 in the example above):· Your entire distribution would be tax-free, and· You would avoid the 10% additional tax on early distributions.What happens if I don’t make any election regarding my retirement plan distribution?The plan administrator must give you a written explanation of your rollover options for the distribution, including your right to have the distribution transferred directly to another retirement plan or to an IRA.If you’re no longer employed by the employer maintaining your retirement plan and your plan account is between $1,000 and $5,000, the plan administrator may deposit the money into an IRA in your name if you don’t elect to receive the money or roll it over. If your plan account is $1,000 or less, the plan administrator may pay it to you, less, in most cases, 20% income tax withholding, without your consent. You can still roll over the distribution within 60 days.Which retirement accounts can accept rollovers?You can roll your money into almost any type of retirement plan or IRA. See the Rollover Chart for options.Is my retirement plan required to allow transfer of any amounts eligible for a distribution?If you receive an eligible rollover distribution from your plan of $200 or more, your plan administrator must provide you with a notice informing you of your rights to roll over or transfer the distribution and must facilitate a direct transfer to another plan or IRA.Is my retirement plan required to accept rollover contributions?Your retirement plan is not required to accept rollover contributions. Check with your new plan administrator to find out if they are allowed and, if so, what type of contributions are accepted.Additional resources· Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs)· IRA One-Rollover-Per-Year Rule· YouTube video - IRA/Retirement Plan 60-Day Rollover Waivers (.57 secs.)· YouTube video - Retirement Plan and IRA Rollovers (1.20 mins.)· FAQs relating to Waivers of the 60-Day Rollover Requirement· Rollovers of After-Tax Contributions in Retirement Plans· Financial Distress and Retirement Plan Distributions - IRS Nationwide Tax Forum presentation on rollovers and other distribution options· Verifying Rollover Contributions - how plan administrators can check the validity of incoming rollover contributions· Announcement 2014-15, Application of One-Per-Year Limit on IRA Rollovers· Notice 2009-68 (PDF), sample explanations to provide employees explaining rollover rights· Notice 2009-75- Rollovers from employer plans to Roth IRAs .