What is an IRA Rollover and how can it benefit you?

If you have left a job or have retired, you may want to consider transferring the money you have invested in one or more employer sponsored retirement plans into a Individual Retirement Account. An IRA rollover it is an effective way to keep your money accumulating tax deferred. By using an IRA rollover, you can transfer your retirement savings to your own account at a private custodian of your choice,and you can choose how you wan to invest the funds. In order to preserve your tax-deferred status of your retirement savings, the retirement funds must be deposited into the IRA account within 60 days of the withdrawl from an employer's Plan. So that you can avoid possible penalties and a 20 percent Federal income tax withholding from your previous employer, you can arrange for a direct rollover for institution to institution transfers. An IRA account can be tailored specifically for your needs and goals and can be used in over 12,000investment choices. Also, IRA accounts usually provide many more investment options than an employer plan, your plan may contain certain investments that are not available in the plan. Lastly, the cost structure for the investment plan are lower because your employer is paying half the costs as well as giving you a 3 percent match.In addition, tax-deferred retirement savings plans from all previous employers can later be combined in an IRA account. Over your lifetime, IRA rollovers may make it easier for you to manage your retirement savings account by consolidating all of your different plans in one location. This will definitely help you to cut down on paperwork and it will give you much more control over the asset allocation of your retirement assets. Also, keep in mind that you maybe able to leave your retirement funds with your previous employer plan , if it is allowed. You may be also able to transfer the funds of your previous to your new employer's plan.Things to keep in mind when taking A distribution from a Traditional IRA is that the distribution is taxed as ordinary income,because it was never taxed before and if you are under age 59 1/2it can also have a 10 percent penalty. Additionally, just as with employer sponsored retirement plans, you must begin taking (RMD) required minimum distributions from your traditional IRA.There are also other alternatives available to reduce your tax bill amount by doing Roth-IRA conversions between 60-70 years of age. The Roth-ira conversion strategy is a process where you convert your Traditional-ira account into the Roth-Ira account and you pay the taxes each year for ten years. If you do the Roth-IRA conversion strategy you will end up with 70% percent of your retirement assets in a Roth-IRA if held for five years. The 70% percent figure was derived by the assumption of a 25% percent Federal tax rate and a 5% state tax rate each year. Just to be very clear each and every year that you do a Roth conversion you will have to wait five years to be able to withdraw funds tax-free. So every deposit is like a taxi-cab meter is running on the deposits into the Roth-Ira account. If you prematurely withdraw funds before waiting the five years to withdraw your principle the entire account is now taxable!!Verducci Asset ManagementRegistered Investment AdvisorJohn C. Verducci 111