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Keep retirement assets working for you
Allows eligible rollover money to remain invested on a tax-deferred basis without paying current income taxes or penalties.
Potential impact of taking an early cash distribution from a 401(k) plan versus transferring eligible retirement assets to a Rollover IRA
The chart illustrates the potential impact of taxes and penalties that a cash distribution from a 401(k) plan might trigger if taken before age 59½, assuming a 25% federal ordinary income tax rate.
Fidelity Advisor Rollover IRA Details
- Baby boomers with large 401(k) accounts
- Pre-retirees and retirees who may want to pass assets on to beneficiaries
- Job changers—including those offered severance or early retirement packages
- Assets must come from an eligible retirement plan
- Direct rollover: distribution check payable to rollover custodian
- Indirect rollover: distribution check payable to participant—must be rolled over within 60 days
- Fidelity Advisor funds in multiple share classes
- None: no limit on eligible rollover assets
- Indirect rollovers must be completed within 60 days of distribution from an eligible plan
- Deductible contributions and any earnings are taxable as ordinary income in the year distributed
- Penalty-free distributions after age 59½
- 10% IRS early withdrawal penalty if taken before age 59½; however, a distribution may be penalty-free if taken for:
- qualified first-time home purchase ($10K lifetime limit)
- qualified higher education expenses
- certain medical expenses over 7.5% of AGI
- certain health insurance premiums if unemployed
- disability or death
- substantially equal periodic payments1
- Required minimum distributions (RMDs) beginning at age 72. The change in the RMD age requirement from 70½ to 72 only applies to individuals who turn 70½ on or after 1/1/20. Please speak with your tax advisor regarding the impact of the SECURE Act on future RMDs.
- Qualified charitable IRA distributions2
- Consolidates multiple retirement plan accounts to make them easier to manage
- Preserves tax-deferred status of eligible retirement plan assets (assets are not taxed until withdrawn)
- Qualified 401(k) assets rolled over to a Rollover IRA may now enjoy the same federal protection from creditors that 401(k) plan assets currently enjoy3
- Flexible distribution options for estate planning and tax management
- 1. Substantially equal periodic payments must be made not less frequently than annually and for the life expectancy of the employee or the joint life expectancies of the employee and a designated beneficiary.
- 2. Qualified charitable distributions may be made from an IRA (other than an active SEP or SIMPLE IRA), and excluded from income, after the IRA owner has reached age 70½, if directly transferred to a qualifying charitable organization, up to a maximum of $100,000. Please consult with your tax or legal advisor for more information on these distributions.
- 3. Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Please consult with legal counsel to determine how this law applies to your particular situation.
- Depending on your firm’s policy, you can use the Fidelity Advisor IRA or invest in Fidelity Advisor Funds® through your platform.
- The above information is educational in nature and should not be construed as legal or tax advice.
- Before investing, have your client consider the funds’ investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Have your client read it carefully.