Maintain your tax-deferred benefits by moving your money into an IRA

An excellent way to preserve the tax-deferred benefits of your investment from your previous employer’s 
retirement plan is to transfer or “rollover” your money into an IRA.

By moving your money into a Rollover IRA, you may avoid an immediate 20% federal tax withholding. Depending on your tax bracket, other federal taxes may apply when you file your income taxes (additional state and local taxes may apply). In addition, you may pay a 10% IRS penalty if you are under the age of 59 ½ (additional state penalties may apply). By moving your money into a Rollover IRA, you may avoid these tax implications.  If you decide to take a lump sum distribution from your retirement plan, are under the age of 59 ½, and you fall within the 28% tax bracket, here’s what will happen to your savings balance:

Original Account Balance:   $30,000
20% immediate Federal Tax Withholding - $6,000
8% Additional Federal Taxes Due at Filing - $2,400
10% IRS Early Withdrawal Penalty - $3,000
What’s left …    $18,600

Not including any additional state penalties or state and local taxes you may have to pay, it would cost you $11,400 to take all your cash out of your prior plan! If you leave it in your previous plan or roll over your $30,000 you get to avoid paying all those taxes or penalties.

Also, you can take this opportunity to rebalance your retirement portfolio to conform your investment strategy. You also have the possibility of moving your money into a future employer’s plan. In addition, you can consolidate other retirement money into the Rollover IRA.

Transamerica Retirement Solutions and its representatives cannot give ERISA, tax, or legal advice. This material is provided for informational purposes only based on our understanding of material provided and should not be construed as ERISA, tax, or legal advice. Clients and other interested parties must consult and rely solely upon their own independent advisors regarding their particular situation and the concepts presented here. Although care has been taken in preparing this material and presenting it accurately, Transamerica Retirement Solutions disclaims any express or implied warranty as to the accuracy of any material contained herein and any liability with respect to it.

* Securities are offered through Transamerica Investors Securities Corporation (TISC), Member FINRA, 440 Mamaroneck Avenue, Harrison, NY 10528. Transamerica Retirement Solutions and TISC are affiliated companies.

This material was prepared for general distribution. It is being provided for informational purposes only and should not be viewed as an investment recommendation. If you need advice regarding your particular investment needs, contact a financial professional.

© Copyright 2019 Transamerica Retirement Solutions, LLC. All rights reserved.
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