What is a Rollover?

Answer:
A rollover is a distribution from a qualified retirement plan

such as a 401 K or 403(b) plan to an individual which is then “rolled over” from the individual into a different qualified retirement plan such as an IRA, 401K, or Section 403(b) plan. With direct rollovers, the funds go directly from one plan into another at your direction.

For example, if you have a 401K through your employer and end up leaving your job to work for another company, you can roll over your 401K funds into the new employer’s qualified retirement plan without penalty or federal withholding. If your new company does not offer such a plan, you can set up an IRA and rollover the money into your new IRA.

After you get the distribution, you have 60 days in which you can roll the funds over into another qualified plan for the funds to remain qualified and not subject to early withdrawal penalties and federal withholding. However, if the funds are rolled into a tax deferred annuity, a mandatory federal withholding of 20% will occur.


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