The Rollover IRA is a special type of Individual Retirement Account designed to receive money from qualified retirement plans, both employer-provided and private. The plan is designed to allow any amount of money to be “rolled” into the plan as long as you observed the rules of the plan you participated in originally; this allows for portability of retirement benefits and the maintenance of one of the most important benefits of all qualified plans, tax-deferred growth. If not placed into a qualified plan, any distribution would become taxable on the 60th day after the distribution was made – any amount of the distribution not placed in a qualified plan would be included in your taxable income for that year. If you happen to be younger than 59 1/2 at the time of the distribution there will be an additional 10% Federal penalty and many times a State income tax penalty as well.
According to IRS rules, you must begin taking distributions from your Rollover IRA after the age of 70 1/2 or you could be subject to tax penalties of 50% of the required withdrawal amount. A Rollover IRA gives you much greater choices versus most employer-sponsored qualified plans as to how the funds may be invested. In most qualified plans the investments are limited to those offered by the plan while Rollover IRAs allow stocks, bonds, mutual funds, ETFs, annuities and many other types of investments.