It happens to the best of us: you set up your employer’s retirement plan and then forget about it, or you open several different individual retirement accounts (IRAs). You go about your daily life, while behind the scenes, savings are automatically added to your employer-sponsored retirement plan, and you make contributions to your IRAs. But what happens to those retirement assets when you take a new job or decide to retire?
It might be time to consider moving those assets from your current retirement plans into an IRA with Thrivent Mutual Funds. You certainly should understand all your options, weigh the pros and cons, and make a choice which is right for your goals and circumstances.
When can I move assets?
While you can move your IRAs anytime you choose, if you experience any of the following life events, a rollover from an employer-sponsored retirement plan, such as a 401(k), may be an option for you depending on the actions allowed under the plan document:
- Job change
- Retirement
- Reaching age 59½
- Disability
- Plan termination
- Divorce
Options for moving assets from your 401(k) or similar employer-sponsored plan:
- Direct rollover
Your employer will have your retirement assets sent directly to an IRA or new employer plan. You don’t take receipt of the funds, so no federal tax withholding is required.
- Indirect rollover
You take receipt of the funds and have 60 days to deposit them in an IRA or other employer-sponsored retirement plan to avoid paying taxes and possible penalties on the distribution. This works if you need short-term funding and can reimburse your funds within the 60 days.
Distributions from employer retirement plans are subject to a mandatory 20% tax withholding. As taxes are withheld, you must use other funds to roll over the full amount of the distribution. This is important as any portion not rolled over, including amounts withheld, will be considered a distribution and subject to income tax and generally a 10% penalty if under age 59½ unless an exception applies. Learn more about direct and indirect rollover IRAs.
Options for moving assets from one IRA account to another:
- IRA to IRA transfer
Transfer assets from one IRA account to another (known as a trustee-to-trustee transfer, such as from your current institution to a Thrivent Mutual Funds account) for the same type of account (e.g., IRA to IRA). Learn more about IRA to IRA transfers.
- IRA rollover
As with 401(k)s and similar employer plans, you can move money from one IRA to another through a rollover. This rollover can be direct, in which the current plan administrator sends assets directly to the new account, or indirect, in which the plan administrator sends a check made out to you.
With an indirect rollover, you will have 60 days to deposit the amount into a new IRA, or even back into the original IRA, to avoid incurring a tax on the distribution. Note: you can only make one indirect rollover of assets from an IRA once in any 365-day period no matter how many IRAs you have.
- Roth IRA conversion
Convert one type of retirement account to another (like a traditional IRA or employer retirement plan to a Roth IRA). Part or all of the distribution may be subject to income tax. Learn more about Roth IRA conversions.