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Have you left retirement assets at past jobs?  Know your rollover options

February 19, 2015

By Alliant Credit Union

Alliant financial consultants

Your retirement plan may offer you several options for managing your retirement plan assets when you change jobs or retire. Understanding these choices will help you make the right decision.

Your Options

Following are the choices that may be available to you. Note that these selections apply to your contributions, the vested portion of your employer's contributions, if any, and the earnings attributed to both.

Keep your money in the plan. You may be able to leave your savings in your former employer's retirement savings plan. Usually, minimum distributions must begin after you reach age 70½. This option allows you to continue deferring taxes1 on the account. Although you can no longer make contributions, you can still control how the money is invested.

Transfer your money to another retirement account. You can move your money into an individual retirement account (IRA) or into your new employer’s retirement plan, if allowed. With a direct transfer (also known as a trustee-to-trustee or custodial transfer), the money goes directly from your former employer's retirement plan to an IRA or to your new plan – you never touch the money. This option also allows you to continue deferring taxes.1

Take a cash distribution. You can choose to have your money paid directly to you in a lump sum or in installments (if you are retiring). However, you will be subject to income taxes, and if you are younger than age 59½, a 10% additional tax. In addition, your employer will withhold 20% of your distribution to put toward your federal income tax obligation. Therefore, if you are under age 59½, the amount you receive could be significantly less than you expect.

Avoiding an Immediate Tax Bite

If you receive a distribution from your employer-sponsored retirement plan, you can avoid an immediate income tax bite and possible penalty if you roll over the entire amount into an IRA or a qualified employer plan within 60 days. You can then determine the amount of your distribution and the amount of taxes to withhold. The withheld amount will be recognized as taxes paid when you file your regular income tax. Please remember to consult your tax advisor before making any decisions. It is important to note that withdrawals made from any retirement plan prior to age 59½ are often subject to additional penalties and taxes.

Want to discuss your retirement plan options? Set up a no-cost, no-obligation financial planning session with your local Alliant Retirement and Investment Services financial consultant.


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