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Should You Convert Your Traditional IRA to a Roth IRA?

Option #1: Request a direct rollover.

A Rollover IRA or a direct transfer to your new employer's plan is the easiest way to continue the tax-deferred status of your retirement savings. The reason? By directly rolling over your eligible plan distribution, you can:

Avoid current income taxes and any early withdrawal penalty; and keep your money growing tax deferred.

If you choose a direct rollover:

  • Your distribution will not be subject to federal income tax in the current year.
  • No income tax will be withheld from your distribution.
  • Your distribution will be contributed directly to the Rollover IRA of your choice or, if available, your new employer's qualified plan.
  • Your distribution will be taxed at a later date when you withdraw it from your IRA or from your new employer's plan.

How can you avoid paying unnecessary taxes and penalties?

Consider a Northern Funds Rollover IRA or have your savings transferred directly to your new employer's qualified plan

Direct Rollover Advantages

  • Your money can continue to grow tax-deferred until withdrawn
  • Avoids 20% mandatory withholding tax
  • Avoids 10% early withdrawal penalty

Option #2: Receive the distribution in a check made payable to you. 

 

IRS CIRCULAR 230 NOTICE: This information is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law. For more information about this notice, see northerntrust.com/circular230.

 
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