What does it mean to roll over funds into an Individual Retirement Account?
When you get a lump-sum payment from a pension plan, 401(k) or other retirement plan, you will owe taxes on the money. However, you can defer those taxes if you “roll” the check into a rollover individual retirement account. Rollover accounts differ from conventional IRAs because the money invested in a rollover account comes from an existing retirement plan. By rolling the payout into the IRA, your investment can keep growing tax-free until you start making withdrawals. IRA rollovers must follow a strict set of Internal Revenue Service rules. You must deposit the check from your old pension plan into the rollover IRA within 60 days or else face some nasty tax consequences. Only pre-tax contributions are eligible to be rolled over, and the rollover account should be kept separate from any other IRA accounts you may hold. Ask a tax professional or financial planner for the details.
