Business and Personal Finance Dictionary

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z 

• IRA ROLLOVER
  
  If you take a lump sum out of an employer-sponsored retirement plan and put it into an individual retirement account (IRA), the new account is called an IRA rollover. Any earnings in your IRA continue to grow tax-deferred, and you owe no income tax on the money you move, provided that you deposit the full amount into the new IRA within 60 days. If you don't, you risk owing tax on any amounts you haven't deposited, as well as owing a penalty for making an early withdrawal. You can generally avoid this problem by arranging a direct transfer from your plan to the IRA. If you're moving the money in an employer's retirement plan to an IRA yourself, the plan administrator is required to withhold 20% of the total. That amount is refunded after you file your income tax return, provided you've deposited the full amount into the new account on time, including the 20% that's been withheld. In this case, too, any amount you don't deposit is considered a withdrawal, and you'll have to pay tax on it, and possibly a penalty for early withdrawal as well. Again, you can avoid this problem by arranging a direct transfer from your old plan to the new IRA rollover. That way, nothing is withheld.
  
  Back