Rollovers from Employer-Sponsored Plans
A rollover from employer-sponsored plans refers to the process of transferring funds from a retirement account, such as a 401(k) or 403(b), into another retirement account without incurring taxes or penalties. This is typically done when an employee changes jobs or retires, allowing them to maintain the tax-deferred status of their retirement savings.
When a rollover occurs, the funds can be moved into an Individual Retirement Account (IRA) or a new employer’s retirement plan. There are two main types of rollovers: direct rollovers, where the funds are transferred directly between accounts, and indirect rollovers, where the employee receives the funds and must deposit them into another retirement account within 60 days to avoid taxation.
For example, if an employee leaves a company and has a 401(k) plan with a balance of $50,000, they can choose to roll over that amount into a traditional IRA. This allows them to continue growing their retirement savings without immediate tax consequences.
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