A rollover is a process of moving funds from one eligible retirement plan to another, such as from a 401(k) to a Rollover IRA. A Rollover IRA is an account that allows for the transfer of assets from an old employer-sponsored retirement account to a traditional IRA. The purpose of a rollover IRA is to maintain the tax-deferred status of those assets. Rollover IRAs are commonly used to hold 401(k), 403(b), or profit-sharing plan assets that are transferred from a former employers sponsored retirement account or qualified plan.

There are two types of rollovers: direct and indirect. A direct rollover is when the administrator of your plan delivers your distribution directly to the financial provider where your Rollover IRA is held. With an indirect rollover, you receive a distribution check made payable to you, and you have 60 days to deposit the money into a Rollover IRA to avoid current income taxes.

It is important to note that there are contribution and income limits to rollover IRAs. Additionally, the IRS has a one-rollover-per-year rule when rolling over funds between two IRAs. This rule applies to traditional, Roth, SEP, and SIMPLE IRAs.

In summary, a rollover is a process of moving funds from one eligible retirement plan to another, such as from a 401(k) to a Rollover IRA. The purpose of a rollover IRA is to maintain the tax-deferred status of those assets. There are two types of rollovers: direct and indirect. It is important to be aware of contribution and income limits, as well as the one-rollover-per-year rule when rolling over funds between two IRAs.