Rollover Fund Strategies You May Need to Know

If you have a retirement fund, the day may come when you'll need to roll it over from one retirement fund to a different one.

This can happen for a number of reasons including the changing of your job; you want to change investments, as well as many other reasons.

Retirement funds can be rolled over in one of two ways, through a trustee transfer or a 60 day rollover. Here is a quick look at both of these options.

60 day rollover - With this option you will actually get your funds from your current retirement fund. Then, to finish the rollover you'll need to simply deposit the proceeds into the new retirement account.

Also called an indirect rollover, there are a few rules with the 60 day rollover that you'll need to follow. The process must be completed within 60 days, hence the name, from the date you received the funds from your old account.

If for some reason you fail to complete the process within 60 days, the entire amount could be subject to tax, and a 10% early withdraw penalty.

One other important note. If the funds are coming from an employer, you'll have 20% of the amount withheld for taxes. When you file your taxes you can recover the withheld money. But it is something you need to keep in mind.

Trustee to trustee - This is also known as a direct rollover because you're really not involved in the process. The trustee of your original plan is dealing directly with the trustee of your new retirement fund.

You will not receive any of the proceeds which also mean that it's not treated as a distribution. What that means to you is that you won't have to worry about the 60 day timeframe, or even more importantly, the 20% withholding for taxes.

This type of rollover is the best way for most people to move their retirement fund. This makes it easy to rollover funds to a new IRA, or other employment plan.

The biggest question people have is whether they should keep their money in an employer fund that no longer work for or roll them over to an IRA.

Rolling them over to an IRA is most likely going to be the better option for you. You have more distribution options with the IRA, as well as investment options. Other times it may simply come down to what you're most comfortable with.