Transcripts

"Money File" -Rollover Revenue

SUZANNE PRATT: In tonight's "money file," keys to an easy rollover. Here's Harriet Johnson Brackey, personal finance columnist at the "South Florida Sun Sentinel."

HARRIET JOHNSON BRACKEY, PERSONAL FINANCE REPORTER, SO. FLORIDA SUN SENTINEL: You can't do anything about a turbulent stock market, but you can make sure each move you make is smart. One move that more people will have to get right is rolling over retirement savings into an IRA. As the baby boomers near retirement, almost $490 billion will be rolled over this year from 401(k)s and the like into IRAs.

Rollovers can be tricky, though, and you don't want to accidentally trigger a big tax bill, so here a few things you should understand. First, the time frame. If your retirement plan cuts you a check, you have 60 days to do the rollover. Put this off until day 62 and here comes the tax bill. Also, keep an eye out for what should not be rolled over. If you have a bundle of company stock, you may lose the chance to use a lower capital gains tax rate if you roll that over. And know that your employer will withhold 20 percent for taxes in many cases.

If you don't replace that amount from your own pocket, there will be income taxes to pay because the 20 percent is considered a distribution even though you didn't get any of it. Bottom line, this is one you need to research very well or let a professional handle it. Then, you can get on to the fun part, picking your new investments. I'm Harriet Johnson Brackey.