Considering IRA Rollovers: Making the Right Distribution Decision Now Can Make a Big Difference Down the Road, Part II

(Read Part I)

What type of distribution can be rolled over to an IRA?
To be eligible for placement in an IRA rollover, the distribution must be considered an “eligible rollover distribution.” An eligible rollover distribution must meet the following criteria: [emember_protected custom_msg=”Click here and register now to read the rest of the article!”]

  1. 1. It must be paid from a “qualified” plan or “employer IRA” such as: Pension plans, profit sharing plans, 401(k) plans, employee stock ownership plans, Keogh plans (pension or profit sharing plans for self-employed persons), 457 state and local government plans, SEP IRAs, SIMPLE IRAs
    Distributions from 403(b) plans established for teachers, hospital employees and other employees of nonprofit organizations may also be eligible for rollover treatment.
  2. 2. The payment must not be made in any of the following forms: One of a series of substantially equal payments based on life expectancy; one of a series of installment payments payable over 10 years or more; all or part of a required minimum distribution; a return of any excess deferrals or excess contributions, a refund of life insurance costs, or as a deemed distribution due to a loan default; a hardship distribution.

What if I want to roll over part of my distribution and keep part for immediate use?

You may roll over any part of your lump-sum distribution and keep the rest. However, 20 percent of what you don’t transfer directly into an IRA rollover will be withheld against taxes. If you have a $10,000 distribution and you do a direct rollover of $9,000, then $200 (20% of the $1,000 you didn’t roll over) will be withheld.

In my next column, we’ll consider tax-reporting requirements for IRA rollover and more.

As federal and state tax rules are subject to frequent changes, you should consult with a qualified tax advisor prior to making any investment decision.
Raymond James & Associates, Inc., member New York Stock Exchange/SIPC.



BIO: Brad Dantzler is a trusted financial advisor with more 18 years of experience. A Winter Haven city commissioner, he is active in his church and community and currently is president of the Winter Haven Library Board. He has been an active President’s Club member for six years.

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