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How to Rollover an IRA Near Retirement
If you have decided that you will be able to retire within a few years it is quite likely that you are going to be making some plans for all of your retirement savings and funds. This means that you are going to have to take a close look at your IRA accounts. As the time for retirement approaches you are going to have to ensure that your IRA is performing at the level you need it to, and if it isn’t you may have to find a better alternative and rollover the IRA into a new one.
While this is a fairly simple transaction there can be some penalties and taxation issues if it is not handled properly. You will have sixty days to take the funds from the original IRA and roll them into a new one, and if you fail to do this the IRS is going to consider the entire amount as a part of your annual income. This can create a somewhat devastating tax issue, so be sure to act hastily on this matter. Additionally, if you fail to meet the sixty day time limit and are less than 59.5 years of age there will also be a ten percent penalty on the entire amount as well.
Why would you risk such a venture if you are close to retirement? There are many reasons for both rolling over and transferring IRA funds from one account to another. You may want to transfer a mature IRA to one with better terms, and this can be the best solution because a simple transfer eliminates many of the potentials for penalties. Additionally many people nearing retirement may roll other retirement funds into an IRA to enjoy the tax free deferred status of the money and to consolidate their other savings plans.
Can I keep some of the funds and rollover the remainder? All IRA account holders have the option of taking their funds out of the account, but as stated earlier, there are some penalties. Most funds will issue the IRA holder a check for the amount, minus twenty percent of the balance. This is to account for the IRS federal income tax, additionally if you do not rollover the entire amount into a new IRA fund you are going to be held accountable for that portion used for your own purposes and this would be taxed at your income tax percentage. Finally, if you are less than 59.5 there would be an additional ten percent penalty by the IRS for the taxable portion not returned to the fund.