Frequently Asked Questions (FAQs)
- What is a direct rollover?
- Is a Rollover IRA the same thing as a traditional IRA?
- Can I direct my retirement plan money into a Roth IRA?
- What are the age requirements for Rollover IRA withdrawals?
- Will American Century Investments charge me for a Rollover IRA?
- What's the difference between a direct and an indirect rollover?
- What is the difference between a Rollover IRA and Brokerage Rollover IRA?
- I have company stock. Can I roll it over?
- What if I need some money now but want to roll over the rest? What can I do?
- I already have a check that was made payable to me. What do I need to do to avoid losing more money to taxes and penalties?
- Your application asks for a contact at my previous employer. Where do I find this information?
- I completed the American Century Investments application. What do I need to do now?
- To whom should my rollover check be made payable?
- Where do I mail the check
- I just learned that my former employer's retirement plan is in a blackout period. What should I do?
- My employer needs American Century Investments to sign my distribution paperwork. How do I get that done?
- I can't decide on a mutual fund. Can I just put this into a money market fund?
When you choose a rollover, also known as a direct rollover, your money (also known as a distribution) goes to your new employer's retirement plan or a Rollover IRA. If your retirement distribution check is made payable to your new plan or a Rollover IRA on your behalf, no withholding taxes or penalties will occur.
If you have company stock as a part or all of your employer-sponsored retirement savings plan, you have two options:
Depending on your company plan, you may be able to transfer your company stock directly to an American Century Brokerage Rollover IRA without liquidating the assets.
You may also sell the stock and roll over the proceeds directly into a Rollover IRA. You will not incur an income tax liability provided the proceeds are rolled over within 60 days. However, you are not allowed to keep the stock and contribute the equivalent value in cash to a Rollover IRA.
Not exactly, though your Rollover IRA will be very similar to your Traditional IRA. The primary differences are the source of the money in the account and your ability to transfer that money into a new employer's retirement plan. While you can almost always* combine your rollover assets with your existing IRA to create a single Traditional IRA account, this may limit your future ability to roll that combined account into a new employer's retirement plan.
*There may be special tax considerations or rollover limitations for older workers and for certain types of 457(b) plans. You should consult your financial adviser or tax professional before starting your rollover if you were born before 1936 or have assets in a 457(b) plan.
If your previous employer offered a Roth 401(k) option as part of your retirement plan, you can roll any money you have in that account directly into a Rollover Roth IRA.
More likely, you will need to first transfer your retirement plan money directly into a Rollover IRA and then convert it to a Roth IRA. There are tax implications associated with this conversion, and you should consult your tax advisor.
Like traditional IRAs, Rollover IRAs have both a minimum age for penalty-free withdrawals and an age at which you are required to take distributions from your account:
- In general, you must wait until age 59½ to begin Rollover IRA withdrawals without penalty. Your employer's plan may not allow you to make withdrawals while you're still employed.
- You must begin taking Required Minimum Distributions from a Rollover IRA beginning at age 70½. You will pay income taxes on these distributions.
American Century Investments does not charge a fee for opening a Rollover IRA, or for providing a personalized investment plan.
If the total balance of all mutual fund accounts registered to your SSN are less than $10,000, there is a $12.50 account maintenance fee assessed twice a year.
A direct rollover transfers money directly from your previous employer's retirement plan into a Rollover IRA. Even though the distribution check may be mailed to you, it is made payable to the financial institution with which you plan to establish your Rollover IRA. Direct rollovers are considered preferable to indirect rollovers because you avoid penalties and taxes on your retirement money during the rollover process.
If the check is made payable to you, even though you plan on establishing a Rollover IRA, it is called an indirect rollover. Many things make this generally less preferable than a direct rollover:
- Your former employer or plan sponsor must withhold 20% of your money as a prepayment of federal taxes, and may withhold more for state taxes.
- When you do roll the money into a Rollover IRA, you will have to either make up the withheld 20% along with any withheld state taxes, or pay taxes on that amount.
- Even if you make up the 20% withholding, an indirect rollover must be completed within 60 days.
Think of your Brokerage Rollover IRA as a Rollover IRA with more investment choices. With a Brokerage Rollover IRA you can choose from a wide array of load and no-load mutual funds from hundreds of fund companies as well as individual securities like stocks and bonds.
Depending on your retirement plan, you may be able to roll over company stock to an American Century Brokerage Rollover IRA through the following options:
- You can roll over your company stock directly to an American Century Brokerage IRA without liquidating the assets; or
- You can instruct your employer to sell your stock and directly roll over the proceeds into a Rollover IRA; or
- You can receive the stock certificates. You may then roll over the stock to an American Century Brokerage Rollover IRA or sell the stock and roll over the proceeds. You will not incur any income tax provided the rollover is completed within 60 days. You are not allowed to keep the stock and contribute the equivalent value in cash to a Rollover IRA.
Your current plan administrator can help you request the amount you need. It will be sent directly to you as a plan distribution. This amount will be paid to you and will be subject to 20% federal withholding and early withdrawal penalties. You can then directly roll the rest of your account into a Rollover IRA.
If you have already taken your distribution from your employer-sponsored retirement plan, you have two options for reinvesting:
- Invest the money into a Rollover IRA, or
- Transfer it to your new employer's plan if allowed.
To avoid additional taxes and penalties, you must reinvest within 60 days of when you received the check.
The check you received was the net of your vested account balance less a 20 percent federal tax withholding. You can claim a credit for this withholding on your next income tax return and recover this amount. To do this, you must add money to the amount you reinvest to make up for the 20% withheld. As long as you reinvest your full, pre-penalty, vested account balance within 60 days, you will not owe penalties or taxes.
For example, a $10,000 retirement plan account will be distributed directly to you as an $8,000 check with $2,000 withheld by your plan administrator. If you reinvest $10,000 within 60 days, the $2,000 withholding will be credited back to you at tax time. If you are only able to invest $8,000, you will still be able to recover a portion of the withheld amount. Consult your tax advisor about recovery of distribution tax withholdings.
Remember, you will only owe taxes and penalties on the amount not reinvested into a retirement account within 60 days. If you decide not to reinvest any of the money for retirement or miss the 60-day reinvestment deadline, you could lose 45% or more of your money in taxes and penalties, so taking the cash distribution is probably not the best choice for your money.
There are several places you should be able to find this information:
- Your last retirement account statement,
- Your previous employer's Human Resources or Payroll department or
- Within your retirement plan's Summary Plan Description (SPD). Most company retirement plans are required to have, and make available to retirement plan participants, an SPD that explains their retirement plan. The Human Resources or Payroll department can provide you with a copy. You also may be able to get this document online if you have Web access to your retirement account.
- Contact your former employer and/or plan administrator and tell them you are doing a direct rollover of your retirement plan money to an American Century Investments IRA.
- Complete any distribution forms required by your former employer. Be sure to ask your former employer for a benefits contact name and phone number for follow-up questions. The contact and phone number may be listed on your last investment statement.
- Make sure your former employer or plan administrator writes your American Century Investments IRA account number on your distribution check and make it payable to:
American Century Investments FBO: <Your full name>
Make it payable to:
- American Century Investments FBO: <your full name>.
Also, ask your former employer or plan administrator to write your American Century Investments IRA account number on your distribution check.
American Century Investments
P.O. Box 419292
Kansas City, MO 64141-6292
A blackout period occurs when a plan is undergoing significant changes, such as a company merger or acquisition, a change in the plan's investment choices or a change in plan administrators. As a participant, you are prevented from conducting certain activities on your account until the blackout period is over. Although all vested money is still yours, you will only be able to access your money after the blackout period. American Century can help you by calling your previous employer while you are on the phone to determine next steps.
You will need to mail your paperwork to a Rollover Specialist:
American Century Investments
P.O. Box 419292
Kansas City, MO 64141-6292
Yes. A money market is a good choice while you decide into which funds you'll ultimately invest. If you need help choosing, call one of our Investment Consultants today.
An investment in a money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Yields will fluctuate, and although the fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund. Unlike most FDIC-insured CDs, a money market fund's yield and return will vary. Fund shares are not guaranteed by the U.S. Government.
This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.