Investing Basics
IRA Rollovers

When you leave your job or retire, you have to decide what to do with the money in your current employer’s retirement plan. Typically, you’ll have four main options:

1.Leave your money where it is (if permitted by your employer’s plan)
Advantage: Your money remains tax-deferred until you withdraw it.
Disadvantage: Your distribution options, investment choices and account services will be limited to those available through the plan.

2.Roll your employer plan account to an IRA
Advantage: Your money remains tax-deferred until you withdraw it. You decide how to invest and can access this money as you need to.
Disadvantage: Distributions from IRAs are subject to income tax and, if taken before age 59 ½, a 10% premature distribution penalty.

3.Transfer the savings to your new employer’s plan (if permitted by the new employer’s plan)
Advantage: Your money remains tax-deferred until you withdraw it.
Disadvantage: Your distribution options, investment choices and account services will be limited to those available through the plan.

4.Cash out your 401(k) account
Advantage: You can use the cash right away.
Disadvantage: Taxes and penalties will take a big bite out of the value of your distribution. That’s because any money distributed to you from your plan account is taxable as income in the year it is received. Depending on the size of your distribution, cashing out your entire account could even push you into a higher tax bracket. Also, if you are under age 55, you may owe an additional 10% premature distribution penalty.

If you decide to roll over the savings to a Rollover IRA, consider a Homestead Funds IRA . We make the rollover process easy. Just call us at 1-800-258-3030 to speak with one of our friendly client service associates. Or, you can start the process yourself by printing out and completing the Individual Retirement Account Application.

Read more about IRA rollovers in the Helpful Tips guide, Deciding What to Do with your 401(k).