Dale Farland

Feb 26 2014

Consolidate Your Assets with IRA Rollovers

IRA Rollover

If you are making a career move, getting ready to retire, or have already retired, you should consider consolidating your retirement assets into one place. Why roll your funds into one IRA? Contrary to your mother telling you to “not put all your eggs into one basket,” it makes sense.

By combining your retirement plans and other IRAs into one IRA, you streamline your recordkeeping and can better manage your retirement assets. With a single account, it will be easier to see the big picture and guard against unwanted investment overlap or incorrect asset allocation. Reviewing your portfolio’s asset allocation and periodically rebalancing your portfolio will also be easier. The decisions as to how to best invest for meeting your retirement goals can be better determined with a consolidated IRA.

You will receive one account statement instead of several, saving you time and effort. What is more significant, with a single account, it only takes one phone call to have your questions answered or to meet with your advisors to review your personal situation. Finally, when it is time to take your Required Minimum Distribution (RMD), you will have a better understanding of the total amount for the required withdrawal.

Tax Deferral is an Important Benefit
By rolling over your retirement plan and postponing income taxes, you will have more money available for investment. You will continue to benefit from potential tax-deferred growth on your rollover IRA investments. In addition, you will pay income taxes only when you withdraw funds from your IRA. Over several years, the benefits of continuing tax deferral can make a big difference.

You Can Accomplish a Tax-Deferred Rollover in Two Ways
One choice is to arrange for a trustee-to-trustee transfer (“a direct rollover”). A direct rollover is generally the least complicated choice. You simply inform the administrator of your retirement plan that you want your funds transferred into the IRA you have established. In addition to simplicity, this approach offers another significant advantage: tax will not be withheld from the distributions which are rolled over in a direct trustee-to-trustee transfer.

A second option is to receive the plan distribution and roll it over to an IRA within 60 days (“delayed rollover”). If you decide to take your distribution directly, without rolling it over through a direct trustee-to-trustee transfer, you have 60 days to rollover the funds into an IRA. There are disadvantages to this method. The plan administrator will withhold 20% of the distribution for federal income taxes. This will not be a problem as long as you replace the 20% of the funds from another source and deposit the full amount of the taxable distribution in a rollover IRA within 60 days. Remember, to avoid paying income taxes on the 20%, you need to replace that amount from other sources.

Hills Bank Trust and Wealth Management Can Guide You Through Retirement
Whether you are looking towards retirement or are already retired, the funds in your retirement plan and IRA are a very important financial resource to you. Our Trust and Wealth Management Department understands this and can assist you in finding the best retirement lifestyle solutions.

Investment products are not a deposit, not FDIC insured, not insured by any federal government agency, carry no bank guarantee, and may go down in value.
Dale Farland

About Dale Farland

Dale Farland is Vice President, Trust Officer at Hills Bank’s North Liberty Forevergreen Road location. She has been at Hills Bank since 2011 helping customers with wealth management and financial planning. Dale is a graduate of Michigan State University. She earned her MBA from the University of Michigan with a concentration in Finance. Dale is a Certified Trust and Financial Advisor (CTFA) and Accredited Estate Planner (AEP®). Dale can be reached at dale_farland@hillsbank.com.

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