Q: I have an IRA, but I am not putting anything in it, because I changed jobs. The current job does not have an IRA or anything. What can I do to still continue to save for retirement? Are there any types of IRA plans that I can get? Please help me, because my husband has a 401(k) plan, and he may be all right when he retires, but I will not be.
A: Just because you can’t continue contributing to a former employer’s plan does not mean you can’t continue to invest for retirement.
You might want to consider what’s called a tax-deferred “rollover” Individual Retirement Account (IRA). A rollover occurs when you withdraw money from one eligible retirement plan and move it to another eligible plan. You need to first set up the IRA, which is very easy. You can go to your local bank or any number of financial institutions to set one up.
With a rollover IRA, you decide how to invest the money.
If you choose this option, make sure the money is transferred directly from the old plan to the new IRA. If your former employer makes the check payable to you, the company is required to withhold 20% of the money for tax purposes.
To transfer funds directly, all you have to do is fill out an application for a rollover IRA and send it to the financial institution of your choice; the new IRA custodian will process the transfer for you. If you fail to roll over the money within 60 days, you’re subject to the 10% penalty for an early withdrawal. I can’t tell you how many people get caught with a nasty tax bite because they didn’t do the rollover in time.
You are right to be concerned about saving for retirement, but I also hope that what your husband has built up in his retirement will be part of your overall retirement plan as a couple.