IRAs

	401(k) Tip
	Rolling over your 401(k) plan keeps your earnings tax deferred. A rollover IRA gives you flexibility, a range of investment choices, and control!

When you retire, or leave your job for any reason, you can roll your 401(k) over into a traditional individual retirement account (IRA). There, your money will continue to be tax deferred and any future earnings will be tax deferred as well. You may also have the opportunity to convert your rolled over IRA into a Roth IRA.

An IRA is a self-directed retirement savings account. If you are earning an income, you may open an IRA at any time—or you can create one to hold your rollover. Once you do so, you are responsible for investing your money and following the rules laid down by the government.

Setting up an IRA rollover is similar to other rollovers. Upon your request, your former employer will either write a check made out to your IRA custodian or arrange an electronic transfer. Or you can take a lump-sum withdrawal and receive 80% of your account value. Within 60 days, you must put that amount plus the 20% withholding into an IRA. If you don’t deposit the entire amount, you will owe taxes and withdrawal penalties on the remaining amount.

Once you have rolled your money into an IRA, you can invest in any of the alternatives available through your account custodian. You can't invest in fine art, gems, non-US coins, and collectibles. You may also contribute to your account as long as you stay below the annual limit. For 2008, the government caps your annual contributions at $5,000, plus an additional $1,000 if you’re 50 or older. You must report your contributions to the IRS. Depending on the amount of income you earn, you may be able to deduct some or all of what you put into the account.

The Conduit IRA Before 2002, you had to open a conduit IRA for any rollovers you planned to roll back into a new employer’s retirement savings plan. Contributions to a conduit IRA could only be made through rollovers from qualified savings plans. Likewise, rollovers into a 401(k) could only come from a conduit IRA. Today, you can roll your money into an existing IRA and, depending on your employer, you may be able to roll your IRA into your 401(k).