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

20% mandatory federal incometax withholdingAssumptions:10% early distribution penalty5% additional federal incometaxes are owedInvestment remains tax deferredNo current income taxesor penalties$30,000 early cashdistribution:$30,000 transfer to aRollover IRA:$30KRemaining$10.5KPenalties & Taxes$19.5KRemaining

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.

Featured Resources

Fidelity Advisor Rollover IRA Details

Target Market

  • 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

Eligibility Requirements

  • 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

Fund Offering

  • Fidelity Advisor funds in multiple share classes

Maximum Contributions

  • None: no limit on eligible rollover assets

Deadline

  • Indirect rollovers must be completed within 60 days of distribution from an eligible plan

Distributions

  • 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 70 to 72 only applies to individuals who turn 70 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

Product Advantages

  • 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

Get Started with Your Clients

1
Meet with your client to discuss retirement goals and create an income plan
2
Share the IRA Enrollment Guide with your client
3
Complete the new account application or rollover form
 
 

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