Understanding your options
Direct rollover — the tax-saving alternative
From a tax and long-term investment standpoint, a "direct rollover" of your distribution can be the wisest course of action for many people. In a direct rollover, your assets are moved from your current retirement plan directly to an IRA or another retirement plan. You never come into contact with the assets. A direct rollover to an IRA or a new employer's plan is a smart way to avoid the mandatory 20% withholding requirement.
If you're moving to a new job and the company has a retirement plan, you may be able to roll your assets over directly into the new plan. Check with your new employer in advance to make sure the new plan can accept your rollover. Sometimes you can complete a rollover even if you are not immediately eligible to participate in the plan.
The Tax Relief Act of 2001 also introduced increased portability between different types of retirement plans, effective January 1, 2002. That means you are now able to move money between plans like 401(k), 403(b), 457 and profit sharing plans when you move from job to job.* And you may also move assets from a 457 plan to an IRA rollover. The bottom line: you have more control over your retirement plan money and where it's invested.
Learn more about the advantages of a direct rollover.
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