What to know about rollovers

Investing & Retirement

You can move your money tax-free between retirement accounts. Here’s how.

A rollover is essentially the transfer of one investment account to another. Most commonly, it occurs between qualified retirement accounts (like when you change jobs and have a 401(k)—more on that later). Some investors may also roll over money to reinvest funds from a mature security into a new issue of the same or a similar security.Disclosure 1 So when and why would you need to perform a rollover? We’ll walk you through some scenarios and answer common questions to up your investing know-how.

Why would you want to roll over an account?

Let’s say you had a 401(k) through work, but then you left your job. Instead of keeping your money where it is, or cashing out and paying taxes, you can perform a rollover to keep your existing contributions tax-deferred.

If you left a job to become an entrepreneur—or you’re not eligible for your new employer’s plan—you could roll your 401(k) into an individual retirement account (IRA). Some people choose to roll their 401(k) into a traditional IRA to gain greater control over their investment choices, although that typically comes with a higher price tag. Traditional IRAs tend to have more expenses to cover operational costs, such as account maintenance fees, commissions, and expense ratios.

A rollover from a traditional IRA to a Roth IRA is common for people who want to avoid higher taxes at the time they’ll need access to their funds. Plus, unlike 401(k)s, Roth IRAs don’t have a required minimum distribution (RMD) starting at age 73, which means more of your money can continue to grow into your retirement. But since Roth IRAs invest after-tax dollars, any conversion amount will be subject to income tax, which may be significant.

You might also roll one IRA account into another to take advantage of lower management costs and fees, or simply to streamline several smaller investment accounts into one.

When it comes to rolling over savings from an employer-sponsored plan, you have options. You can roll it over into an IRA, leave it with the employer plan, or cash out. Before transferring your retirement assets to an IRA rollover, be sure to consider investment options and services, fees and expenses, withdrawal options, required minimum distributions, and tax treatment of each option and how they align with your financial needs and retirement plans.

Rollovers with Truist Invest

Truist Invest is a hybrid approach to investing that combines the benefits of data-driven technology with support from a team of registered financial advisors from Truist Advisory Services.

 It gives you the flexibility to set investment goals (like saving for education or retirement) and allows for rollovers through a convenient digital process.

Frequently asked questions

What’s a direct rollover?

A direct rollover is when a bank or institution wires or directly sends a check to the new bank or institution without involving the account holder.

What’s an indirect rollover?

An indirect rollover is when a bank or institution makes a check out to the account holder. The owner is then responsible for depositing 100% of the funds into a new qualified account within 60 days to avoid penalties.Disclosure 2

Indirect rollovers are limited to one within a 12-month period. They also cannot be split among multiple accounts.

Is a rollover a taxable event?

Rollover transactions aren’t taxable if they’re between qualified retirement accounts. If the new account is a Roth IRA, it will be taxable since the Roth invests after-tax dollars.

When doing an indirect rollover, you may be subject to taxes and penalties if:

  1. You exceed the designated time limit
  2. You keep some of the funds for personal use

Do I need to report rollovers to the IRS?

Yes. Even if a rollover isn’t a taxable event, it still needs to be reported on a federal return.

Can I use Truist Invest for more than a rollover account?

Yes. You can set up other types of goals (major purchase or general investing) and open other types of accounts (individual, joint with rights of survivorship, traditional IRA, or Roth IRA). Set up an appointment with one of our advisors to discuss your financial goals.

Investment and Insurance Products:

Are Not FDIC or Any Other Government Agency Insured • Are Not Bank Guaranteed • May Lose Value

Comments regarding tax implications are informational only.

Truist and its representatives do not provide tax or legal advice. You should consult your individual tax or legal professional before taking any action that may have tax or legal consequences.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

Investment Advisory services, including Truist Invest, are offered by Truist Advisory Services, Inc., a SEC registered investment adviser affiliate of Truist Financial Corporation.