A traditional IRA may allow you to defer tax payments on contributions or rollovers from 401(k), 403(b), pension, or profit sharing plans, as well as tax-sheltered annuities (TSAs) until the time of withdrawal. Roth IRAs differ from traditional IRAs in that contributions are non-deductible – but qualified withdrawals are tax-free! Whether you wish to roll over your qualified 401(k) plan balance from a former employer or transfer your account from another institution, our friendly and experienced staff can assist you.
Consider a 401(k) to IRA Rollover
If you are making a career move or getting ready to retire, you may be eligible to receive a retirement plan payout. If you simply take the payout, you’ll owe income taxes on the distribution, and possibly an early withdrawal penalty as well. Rolling the distribution into an individual retirement account (IRA) may be a far better choice.
Why roll your funds into an IRA?
Rolling your funds into an IRA allows you to continue to benefit from tax deferral. You may have more investment options to choose from than your current plan offers. And, if you have an existing IRA or additional accounts in other employer-sponsored plans, a rollover IRA allows you to consolidate and streamline your retirement assets in a single, easy-to-manage account.
Tax deferral is an important benefit.
By rolling over your distribution and postponing income taxes, you’ll have more money available for investment. In addition, you’ll continue to benefit from potential tax-deferred growth on your rollover IRA investments. You’ll pay income taxes only when you withdraw funds from your IRA.
Over several years, the benefits of continuing tax deferral can make a big difference. You can accomplish a tax-deferred rollover in two ways: by arranging for a trustee-to-trustee transfer (a “direct rollover”) or by receiving the plan distribution and placing it into an IRA within 60 days.
Arranging a direct rollover
A direct rollover is generally the least complicated choice. You simply inform the administrator of your retirement plan that you want your funds transferred into the IRA you’ve established. In addition to simplicity, this approach offers another significant advantage: no tax withholding applies to distributions that roll over in a direct trustee-to-trustee transfer.
Consolidating your retirement assets
If you have multiple retirement accounts, consolidating your assets into a single rollover IRA can make it easier for you to keep track of your money and manage your investments. With a single account, you’ll be better able to see the big picture and guard against unwanted investment overlap. Reviewing your portfolio’s asset allocation and periodically rebalancing your portfolio will also be a lot easier. You’ll receive one account statement instead of several, saving you time and effort. What’s more, with a single account, it only takes one call to one advisor when you have questions or concerns about your retirement savings.
Please note that neither Hills Bank nor the Hills Bank Trust and Wealth Management Department provide tax or legal advice. You should always consult an attorney along with a tax professional to determine how to prepare the best estate plan for your situation. Investment products are not a deposit, not FDIC insured, not insured by any federal government agency, carry no bank guarantee, and may go down in value.