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Rollover IRA. What is It?

A Rollover IRA can be a bit confusing. The questions: "What is a Rollover IRA?" and "How does a Rollover IRA differ from a Traditional IRA?," are two of the most frequently asked questions by our clients.

Several years ago, when a plan participant wanted to roll over their employer-based retirement plan such as a 401(k), 403(b), or TSP(Thrift Savings Plan), that plan participant had a decision to make. They could roll the plan over to a Traditional IRA, or they could roll it over to a conduit IRA, most commonly titled and referred to as a Rollover IRA.

If the plan participant rolled the money into a Traditional IRA that contained other assets (comingled), the money could not be rolled back into another employer's plan. However, if the participant rolled over the retirement plan into a Rollover IRA, then that money could later be rolled back into another employer's retirement plan, assuming the plan allowed it.

Nowadays, because of the portability enhancements brought about by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), titling an IRA account Rollover IRA is no longer necessary. A rollover into a Traditional IRA is now fully portable(pre-tax dollars only) and can be rolled back into any employer-based retirement account, assuming the plan permits such a transfer.

The EGTRRA changed a lot of aspects of individual and employer-based retirement plans. To better understand these changes and how they might affect you, please take a minute to order a Rollover Kit. The Kit includes many helpful Stifel retirement planning publications that can help you make a better decision about your retirement savings plan.

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