Money left in a past employer-sponsored retirement plans may prove to be a big temptation. Taking the money may seem easy, but it could also be costly. If you are under age 59½, withdrawing the funds will trigger a 20% mandatory tax withholding and a 10% early withdrawal penalty. In addition, you will pay ordinary income tax on the withdrawal.
Keep in mind that neither Nationwide nor our representatives provide tax or legal advice. You should consult with an attorney or other professional advisor for such advice.
An IRA rollover is one way to:
Keep your money tax deferred until you choose to withdraw it
Gain investment freedom
Consolidate multiple accounts
Considering an IRA rollover?
With an IRA rollover, you can transfer money from employer-sponsored retirement plans into a single traditional IRA. Rolling over puts your money back in your hands, so you can decide how to invest it. And, by consolidating retirement accounts from past employers, it’s easier to manage your investments. Keep in mind that your IRA may be subject to market risks, including possible loss of principal.
The three most common reasons to rollover are when:
You get a new job
Your employer stops offering a retirement plan
Keep in mind that there are some restrictions with an IRA:
You cannot take a loan from your IRA
With a traditional IRA, you must begin minimum distributions at age 70½
You may lose protection from creditors
Transfer the money directly
When you set up a rollover IRA, be sure that any loans on your account are paid off. Then, be sure the funds are sent directly to the administrator of your new IRA from your current plan to avoid paying tax and possible penalties. If you accept a check directly, you only have 30 days before federal taxes and early withdrawal penalties are applied, reducing your hard-earned investment.
Contributions to IRA rollovers may be limited to money that was formerly part of a 401(k), 457 or 403(b). You may not be able to add other money to your IRA rollover.
Setting up an IRA rollover
Rolling over an IRA can be quick and easy. An investment professional can help:
Determine if an IRA fits in your investment portfolio
Talk about your retirement vision and long-term financial goals
Review your financial statements to understand your current situation
Is it worth it?
Consider these reasons to roll over into an IRA:
Preserve retirement savings by avoiding tax penalties and early withdrawal charges
Consolidate (and, simplify) your retirement savings into one account
Choose from a broad range of investments
You can rollover as many accounts as you have − no matter the amount or the number.