Expert Tips For Moving Retirement Plan Assets

Many hard-working people all over the world dream of a smooth retirement after years of stress on the job. They want to know that they won’t have to work after retiring in order to have enough money to do the things they like. Fortunately, there are ways for that to happen.

A lot of companies offer workers a retirement plan, and even if your company doesn’t, you could always enroll in one by yourself. To make the most out of your retirement plan assets, however, you might want to consider moving them around.

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Why People Move Retirement Plan Assets

There are actually many reasons for a person to want to move their retirement plan assets. Your financial circumstances might have changed or you have left the job that provided you with a retirement plan. Moving the assets is also a great way to maximize your savings if you know what you are doing. The catch to making this move is whether you get to keep the tax-deferred benefits with your assets since some moves will have taxation. To move your retirement plan assets, you need to understand your options.


Also known as an IRA transfer, this is when you move your retirement plan from one company to the other. This is considered a direct movement of assets from one IRA to another. In this move, you don’t take control of the assets.

The professionals from say that this move is not taxable because the assets were never made payable and they were not distributed. It is also not reported to the IRS. You can make this move between two traditional IRAs, two Roth IRAs, or two simple IRAs. It is also possible to move your retirement plan assets from one simple IRA to a traditional one.

Pro tip: you have to be certain that you are moving the assets to the right plan. This means that the receiving plan has to be eligible to receive the assets, or else you risk losing the tax-deferred status of the assets if you move them to the wrong retirement plan. You might even get hit with new taxes if you’re not careful. So, in short, make sure the receiving plan is eligible for such a move.

Direct Rollover

This is another very common approach to moving your retirement plan assets, and it’s similar to a transfer. In a direct rollover, however, the transfer isn’t limited to the same type of retirement plan. You can roll your retirement assets, for example, from a 401(k) to an IRA if you want.

This helps people who have participated in an employer-sponsored plan and wish to transfer their funds to an IRA. A direct rollover is considered a trustee-to-trustee transaction like the transfer. Also similarly to the previous option, this transfer is tax-free, though the plan provider will report the transaction to the IRS.

Pro tip: with rollovers, you need to roll the amount within 60 days. So, always keep that time limitation in mind because, within these 60 days, the amount of money isn’t subject to income tax. You should also know that this kind of rollover can only be used once during the 12-month period for each one of your IRAs. This is why you need to plan this transfer carefully and be aware of its limitations.

Indirect Rollover

In this type of rollover, it is you who withdraws the money and takes control over the assets before deciding to deposit the money into a different, but eligible, retirement plan. The asset transfer in an indirect rollover is tax-free but only if you complete the transfer to another eligible plan within 60 days.

If you fail to do so, your entire assets will be subject to taxation at normal income tax rates. One important thing to remember is that a 10% federal tax penalty might also be applied if your assets are withdrawn before the age of 59 and a half. Keep this tip in mind so you could delay the process as much as possible to avoid this taxation.

Moving your retirement plan assets is complicated and you should always consult with experts before you do it. They will tell you if this is the right move and advise you on the points to keep in mind while transferring your retirement assets. While some of these transfers are optional, others are obligatory, like when you’re leaving a company and exiting their retirement plan for employees. In any case, if the transfer won’t benefit you, and there’s no need to do it, then you could leave your assets with the current plan.

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