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Ira Rollover

Definition of Ira Rollover

If you move assets from an employer sponsored retirement plan to an IRA, youÔÇÖve completed an IRA rollover. You owe no income tax on the money you move if you deposit the full amount into the new IRA within 60 days or arrange a direct transfer from the existing account to the new account. If youÔÇÖre moving money from an employerÔÇÖs retirement plan to an IRA yourself, the plan administrator is required to withhold 20% of the total. That amount is refunded after you file your income tax return, provided youÔÇÖve deposited the full amount into the new account on time, including the 20% thatÔÇÖs been withheld. Any amount you donÔÇÖt deposit within the 60-day period is considered an early withdrawal and youÔÇÖll have to pay tax on it. You might also have to pay a penalty for early withdrawal if youÔÇÖre younger than 59 1/2. But if you arrange a direct transfer from your plan to the rollover IRA nothing is withheld.

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Financial Dictionary

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