Changing Jobs? Approaching Retirement? Managing Your Rollover What should you do with the money in your employer's retirement savings plan? If your account balance exceeds $5,000, you may elect to leave the money in your previous employer's plan. If you'd rather take the cash there are significant advantages to reinvesting rather than taking a cash payout. Your Reinvestment Options It's important to understand the alternatives available to you for reinvesting your money so it continues to work for you. There are three ways to reinvest: Rollover IRA Rollover Annuity New employer's tax-deferred retirement plan A Rollover IRA Rollover IRAs are for people receiving a distribution from an employer's qualified retirement savings plan and for those who don't want to re-invest in a new employer's plan. They are offered by many financial institutions, with a broad selection of investment options. Rollover IRAs allow you to avoid the mandatory 20% federal income tax withholding and the 10% penalty for early withdrawal if you are under age 59½. The money continues to compound tax-deferred until you start taking money out for living expenses during retirement. Be sure to request a trustee-to-trustee transfer or direct rollover. You cannot rollover a distribution from a qualified retirement savings plan directly into a Roth IRA. A traditional IRA must be established to receive the distribution and then converted to a Roth IRA. Rollover Annuity Annuities are contracts, generally offered by insurance companies, that pay a monthly, quarterly, semiannual or annual income benefit for the life of the recipient(s) or for a specified period of time. Annuities are designed to be a regular source of income for life. There are two types of annuities: A fixed annuity guarantees principal and pays a fixed rate. A variable annuity allows investment in securities offering variable rates of return. Both types can be set up as either "deferred" or "immediate" annuities. The type you choose depends on whether you want to defer taking money out until you need it, or whether you're ready to begin receiving retirement payments immediately. Like a rollover IRA, a rollover annuity allows you to continue enjoying tax-deferred earnings until you withdraw your money. Rollover annuities may also offer additional features and benefits for which the issuing company charges additional fees. Your New Employer's Retirement Plan If you're starting a new job, your new employer may offer a tax-deferred retirement plan. Usually, you can move pre-tax contributions and earnings from your existing retirement plan directly into a new plan. Talk to the plan administrator at your new company first. Rules and investment options vary among retirement plans, and not all plans accept rollovers. One additional option to consider: if your account balance exceeds $5,000, you may elect to leave the money in your previous employer's plan. Copyright© Russell Investments 1998 - 2009. All rights reserved. This is a publication of Russell Investments. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company.