What is a Rollover?

   Rollover means to move money from a retirement plan such as a 401(k), 403b (tax sheltered annuity), or 457 (municipal deferred compensation) into an IRA or other plan. If you receive a payout from your employersponsored retirement plan, a rollover IRA could be to your advantage. You would continue to receive the tax-deferred status of your retirement savings and would avoid penalties and taxes.

   There are two reasons that rollovers are favored over other options:

• You have virtually unlimited investment
selections. Unlike your employer’s plan which
may have six investment options or even 50
investment options, in a self-directed IRA, you
can choose any stock, any mutual fund, and a
host of other options listed later.

• Company plans often can restrict choices for
non-spouse beneficiaries. Specifically, they
may not be able to stretch IRA distributions
over their lifetime. The benefit of this “stretch”
is that it defers taxes and allows the funds to
potentially grow longer and larger in a taxdeferred
environment.

   The reason to leave your retirement plan with your company (if they permit this) is because your company plan is covered by ERISA and is protected from creditors. However, under the new Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, the creditor protection will follow the money if it is rolled into an IRA and not commingled with other IRA money (from annual contributions).