Indirect Rollover

DEFINITION of 'Indirect Rollover'

A method of transferring assets from a tax-deferred 401(k) plan to a traditional individual retirement account (IRA). With this method, the funds are actually given to the employee via check to be deposited into their own personal account. With an indirect rollover, it is then up to the employee to redeposit the funds into the new IRA within the allotted 60 day period to avoid penalty.

BREAKING DOWN 'Indirect Rollover'

Monies transferred by this method are subject to withholding rules which in essence cost the employee 20% of the amount to be transferred. However, the employee has full use of the funds for the entire 60 day period, and has the choice of whether to redeposit into the IRA or not. If the employee chooses not to redeposit, the entire amount is subject to tax.

RELATED TERMS
  1. Rollover IRA

    A special type of traditional individual retirement account into ...
  2. Redeposit

    1. The requirement for a person to reinvest a certain amount ...
  3. IRA Rollover

    A transfer of funds from a retirement account into a Traditional ...
  4. IRA Transfer

    The transfer of funds from an Individual Retirement Account (IRA) ...
  5. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...
  6. SIMPLE IRA

    A retirement plan that can be used by most small businesses with ...
Related Articles
  1. Retirement

    SIMPLE IRA Contribution Limits in 2016

    Learn the SIMPLE IRA contribution limits for 2016, with a brief summary of how the plan works, including eligibility and contribution and distribution rules.
  2. Retirement

    Why Rollover Your Retirement Assets into an IRA?

    If you're in the workplace now, chances are you'll ask yourself this question eventually: 'Should I rollover to an IRA?' Here's a guide.
  3. Retirement

    Avoid the Most Common IRA Rollover Mistakes

    Avoid paying excess taxes by learning some simple transfer rules.
  4. Financial Advisors

    IRA Holders Face New Rules in 2015

    New rules for IRA holders mean less loopholes in 2015.
  5. Retirement

    Best Ways to Roll Over Your 401(k)

    When you leave a job, you have some decisions to make about what to do with your 401(k). Here are some choices.
  6. Retirement

    Avoid These Common IRA Rollover Mistakes

    Rolling over an IRA can lead to higher returns and other perks; but avoid these common mistakes.
  7. Retirement

    Moving Retirement Plan Assets: How To Avoid Mistakes

    Sometimes things go wrong in a simple transfer of funds. Make sure you know how to avoid penalties.
  8. Retirement

    The 3 Most Common 401k Rollover Mistakes

    No one is born knowing the tax rules for 401(k)s and IRAs, but only dummies, scaredy cats and suckers don't buckle down to learn them.
  9. Retirement

    401(k) Rollover: Roth IRA or Traditional IRA?

    Here are the pros and cons of choosing to roll over your 401(k) into a Roth IRA and a traditional IRA.
  10. Retirement

    401(k) Rollovers: The Tax Implications

    The tax rules for 401(k) rollovers can be simple or more complex, depending on which path you take.
RELATED FAQS
  1. Can variable annuities be rolled into an IRA?

    Variable annuities are popular in many government retirement plans. But are they transferable to the employee's IRA upon ... Read Answer >>
  2. How are Simplified Employee Pension (SEP) IRAs taxed?

    Understand the tax advantages of a Simplified Employee Pension IRA plan, and find out how both the employer and the employee ... Read Answer >>
  3. What is a 401(k) rollover?

    Find out what a 401(k) rollover is, when you might want to roll over a 401(k) and whether a direct or indirect rollover is ... Read Answer >>
  4. Which of the following statements regarding rollovers versus transfers of IRA accounts ...

    The correct answer is A) When an individual moves “qualified” (pre-tax) money from, for instance, a pension plan into an ... Read Answer >>
  5. I have several CDs in my IRA with different maturities. Can I roll them over to another ...

    The limitation on rollovers applies on a per IRA basis. In general, if an IRA is involved in an IRA-to-IRA rollover, it cannot ... Read Answer >>
  6. What are the differences between a 401K and an IRA?

    When employers want to give employees a way to save for retirement, they may offer participation in a 401(k), a retirement ... Read Answer >>
Hot Definitions
  1. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  6. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
Trading Center