Need to Setup a Rollover IRA?

Saving for retirement can be surprisingly complicated. Not only do you need to figure out how much money you’ll need by the time you retire, but you’ll need to decide what type of retirement savings account is best for you. For those who have it, you’ll also want to make sure you’re making the most out of 401k matching as well

Even once you have a plan created and your accounts setup, life can change. You might switch jobs. You may discover a better retirement account option. 

If you end up in a situation where you need to move retirement savings from one account to another, you’ll likely need to setup a rollover IRA. 

What is a Rollover IRA? 

A rollover IRA is an account that’s setup for the purpose of transferring retirement savings from a 401k or other retirement account. A “rollover IRA” isn’t an actual type of IRA like a Roth or SEP, which means it can be any type of IRA. 

Typically, a traditional or Roth IRA is used for rollover purposes, but there can be situations where another type is best suited. 

When Do You Need a Rollover IRA? 

Changing jobs is the most common reason for setting up a rollover IRA. If you had a 401k (or similar retirement account) setup through your previous employer, it’s typically in your best interest to move it elsewhere after you leave. Sometimes, you’ll have no choice but to move it. 

While you do have the option of cashing out your retirement savings when leaving a job, this is a poor choice. In addition to early withdrawal fees, you’ll also be taxed. An early cash out can cost you as much as 40%. By correctly setting up a rollover IRA, however, you can avoid these penalties while maximizing your earning potential. 

Additionally, some people may simply choose to move their retirement savings into a new IRA. This could be to increase your interest, avoid other penalties, change your contribution limit, or simply change financial institutions. 

Whatever your reason, the process is the same. You’ll need to decide on the type of IRA you want to create and where it will be setup. From there, the transfer process can begin. 

Setting Up a Rollover IRA 

Though a rollover IRA is a pretty straightforward concept, it’s very important that the process is done correctly. Otherwise, you could end up losing a portion of your savings and/or hindering your earning potential. 

If you’re looking to create a rollover IRA, or you’re simply trying to understand the concept better, it’s best to speak with a financial professional. KB&P Partners is here for you. 

As independent CFPs and ChFCs, we owe no allegiance to outside companies nor do we receive external compensation from third-party service providers. We work solely for our clients, providing them with professional advice and extensive experience. 

We’re well experienced with helping clients setup rollover IRAs so that they can avoid penalties while maximizing their growth potential. For wealth management and retirement planning Springfield, Ohio, contact KB&P Partners today. 

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