The general rule to always keep in mind is that like can receive like with little trouble.  For example, if you have an SEP IRA and want to move your money into a new SEP IRA rollover account, it should be a fairly simple process of signing a few IRA rollover forms.  In addition, a traditional IRA can be rolled over into almost any other type of IRA, except for a Simple IRA or a Designated Roth IRA.  In general, the rollover with the widest access to target IRAs is the Simple IRA, with one small catch – generally, you must have been participating in a Simple IRA for a minimum of two years before it can receive funds or you can rollover funds from the Simple IRA.

In addition, it’s worth mentioning the special case that exists with IRA direct rollovers from traditional IRAs to Roth IRAs.  Roth IRAs can receive funds from most other types of IRAs, but there will be tax consequences.  Roth IRAs are unlike most traditional IRAs, as they’re funded with post-tax contributions.  When you rollover pre-tax money into a Roth IRA, you’ll be required to pay taxes on the money you are contributing.

In previous years, there were few reasons to pay taxes now and move your money into a Roth IRA.  However, with the legislative changes taking effect in 2010, performing a traditional IRA rollover to Roth IRA is a much more attractive option.  These legislative changes affect not only contribution limits and income limits, but also how any taxes generated in 2010 can be paid.  If you’re interested in rolling your IRA over into a Roth IRA, talk with your tax accountant about the implications for you, both in terms of your tax bill and your investment strategy.

Once you’ve determined which types of accounts can receive your IRA direct rollover, you’ll want to be aware of a common assumption about these transfers that can lead to a mistake.  When you open a new IRA – usually when you start a new job – you may think that it’s immediately ready to receive your direct rollover.  That may or may not be the case.  The first day of employment isn’t always the day your IRA’s eligibility starts.  In some cases, there may be a delay of days, or even weeks or months.  A call to the trustee of the new IRA is the simplest way to find out if the account is ready and able to accept the rollover.

This may seem like a silly mistake, but it’s one that bears further scrutiny.  If you attempt to complete your IRA direct rollover before your account is able to receive funds, the target IRA could reject the rollover entirely, leaving you with a check for your account balance.  This moves your transaction to the realm of indirect rollovers, which could lead to significant taxes, penalties and mandatory withholding fees.

For example, if you elect to do otherwise – perhaps you choose an indirect transfer where you receive your funds as a check – you risk causing great confusion for both you and the tax man.  This may open the door to a lot of problems because, in the eyes of the IRS and according to current IRA rollover rules, a direct rollover is very different from any other kind of money transfer.  And when you’re dealing with the IRS, you want your intentions to be as clear as possible.

When your money is being moved from one plan to another without ever coming into your hands, the transaction is typically defined by the IRS as an IRA direct rollover.  Additionally, this kind of transaction may be called a trustee to trustee transfer or trustee to trustee rollover.  If you’re moving your funds to a new IRA, think IRA rollover transfer – not distribution – as this is the best way to protect your money from unnecessary taxes or penalties.

To keep your retirement funds and their tax deferred status intact, you’ll want to avoid any hint of a distribution.  This can occur when the money comes out of your old, established plan and into your hands.  This kind of transaction is considered to be a taxable event by the IRS and should be avoided.  If, for example, you’re cashing out your fund and heading to some tropical island with the money, you’re performing a distribution and can expect to pay taxes.  While it might be nice to receive a big check up front, this type of transaction will not protect you and your money from a tax burden.

Although the indirect IRA rollover is a perfectly legitimate way to do your rollover, it’s not the best way to move your money to a new IRA.  In an indirect IRA rollover, your original retirement fund would be “cashed out” and a check would be issued to you in your name.  Even if you then turn around immediately and deposit the check into a new retirement plan, you’ll still lose money to mandatory withholding requirements, which could eat away up to 20% of your initial account balance.

To perform an IRA direct rollover, talk to the fund manager of your newest IRA and ask him or her to execute a direct rollover specifically.  Be sure to use the exact terms “direct rollover” when you talk to the manager of the new or target IRA.  This will minimize your risk of any taxes, withholding or penalties, and will ensure that your money keeps growing – tax deferred – until you need it later in life to fund your retirement.

Fees

Obviously, you want to make sure that your precious retirement savings aren’t gradually eaten away by excessive fees and charges.  Every financial account provider will charge you to manage your rollover IRA, but the extent to which these charges vary is astonishing.

For example, some people prefer to use a broker (rather than a bank) and allow the broker to shop around and find the lowest fees possible for their rollover IRA accounts.  However, you must be aware that your broker will charge you a premium for this convenience.  Instead, check out the many comparison tables available online to find the institution that will charge you the lowest maintenance fees for your IRA direct rollover on your own.

Once you’ve identified a few low cost IRA rollover account providers, you’ll want to read through the actual terms and conditions of each proposed account to familiarize yourself with any other fees or charges you may encounter.

Ease of Banking

Convenience and ease of banking are very important when selecting your new IRA direct rollover account provider.  Does your new account offer online banking, phone banking and in-house service?  Does your bank offer a wide range of investment options, including stocks, bonds, mutual funds, and overseas investments?  Can you set up an automatic deduction so that your contributions occur easily and regularly?  How hard is it to adjust or alter a standing order?  Ideally, the bank you choose will offer excellent online and phone service so that you won’t have to spend hours standing in line at the bank to deposit funds into your rollover IRA.

Reliability and Security

Sometimes the highest rate of return isn’t necessarily the best choice.  In the current economic climate, it’s become more important than ever to find a safe and secure account provider for your IRA direct rollover.  Consider financial institutions that are well established and that have a strong track record of growth and prosperity.  Do your research and consider recommendations from friends and family who have been happy with the performance of their IRA direct rollover providers.

Customer Service

Customer service is an extremely important factor to consider when choosing the account provider to manage your rollover IRA account.  Good customer service will be highly evident when you first approach the bank, broker or credit union and enquire about the features and options available to you.  Look at the brochures and information on the financial institutions website – is it easy to understand, user-friendly and informative?  Consider the reception you receive if you go and visit the actual premises.  Finally, listen to word of mouth and online forum reviews to be sure you’re choosing an institution that will treat you and your money with equal respect.

A rollover IRA is a safe and secure vehicle for investment that is supported by the government as a means of helping people prepare for their retirement. In the current turbulent economic landscape, this investment option is highly attractive. In addition, the rollover IRA offers a wider range of options and choices than the traditional 401k, and also provides significant opportunities to increase your profit margin and enhance your savings.

The rollover IRA also offers very straightforward account keeping. The process involved in managing a rollover IRA is far more streamlined than other forms of retirement investment. For example, the IRA direct rollover enables you to consolidate your money into one efficient account and keep a close track on its performance. Pension plans, such as the employer-controlled 401k, can become very fragmented and confusing if you move through various positions and companies throughout your life. Changing jobs can be the perfect opportunity to consolidate and set up a rollover IRA.

Perhaps the biggest advantage of the IRA direct rollover is that it offers greater access to your funds than your employer’s 401k or 403b plan. There are a range of conditions that exist that will enable you to access your money without penalty, if necessary. For example, if you become ill or disabled, if you purchase your first home, or if you incur higher education expenses, you can withdraw IRA funds without penalty.

Another reason that may make an IRA direct rollover right for you is the increased range of investment choices that this pension plan offers. While your 401k may only offer you a return 3 – 5% each year, based on its limited investment options, an IRA direct rollover account offers a higher range of potential return because of its access to a broader range of investment choices.

If you have an interest in investing and are willing to research and look for opportunities to grow your wealth, the IRA direct rollover may just be the perfect vehicle for you. Rather than being confined by your 401k’s enforced investment options, you can actually shop around and find a rollover IRA that focuses on investments that actually interest you. The IRA rollover can also reduce your risk of losing money in a destabilized market, as it allows you to spread your funds over a wider range of investment vehicles, therefore reducing your exposure to risk while maximizing your profit.

If you’re changing jobs, or if you’re approaching retirement, carefully consider the features and benefits offered by the IRA rollover – it may just be the perfect investment choice for you. The IRA rollover provides flexibility, freedom of choice and tax benefits that can boost your retirement savings and start you on the pathway to financial security.