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Rollover IRA

Lord Abbett makes it easy to open a Rollover IRA. Anyone receiving an eligible rollover distribution from a former employer’s workplace retirement plan is eligible to set up a Rollover IRA.

Overview

Overview

This material is intended as general information only and is not intended as legal or tax advice. Some of this information may be quite complex and we strongly suggest you consult with your advisor or tax professional based on your individual situation.

What is a Rollover IRA?

When an individual retires or severs service, his or her former employer is required to provide available distribution options. One available option is a tax-free transfer to a Rollover IRA. Although a Rollover IRA is one option, everyone should discuss with their tax advisor the potential benefits of staying invested in the prior employers retirement plan, such as a 401(k) or 403(b) plan, as opposed to moving their retirement funds to a Rollover IRA.

How does a Rollover IRA work?

Follow these steps to start the rollover process:

  1. Contact your former employer about completing any necessary paperwork. Request the check be made payable to: “Lord Abbett Family of Funds” For Benefit Of: [your name]. To ensure a seamless rollover, your newly established Lord Abbett IRA account number and “Direct Rollover” should appear on the check.
  2. Complete a Lord Abbett IRA Application and Transfer Form.


For individuals whoare married, depending on plan type and or its provisions, your spouse may need to sign a consent form allowing for a rollover distribution. 

Rollover Options: Direct versus Indirect

An IRA rollover can be completed as either a direct or indirect rollover. 

DIRECT ROLLOVER:

Proceeds from your former employer’s workplace retirement plan (i.e., 401(k)) are transferred directly to a Lord Abbett Rollover IRA.  A direct rollover is a tax-free transfer of retirement assets. 

INDIRECT ROLLOVER:

Funds from a former employer’s workplace retirement plan are sent directly to the investor. 

An indirect rollover requires  mandatory 20% federal tax withholding on the  taxable portion of the distribution. The investor then has 60 days from receipt of the funds to deposit the assets into a Rollover IRA. A rollover not completed within the allotted 60-day period is subject to taxation on the total taxable distributed amount and a 10% penalty tax if the account owner under is under 59½ and an exception does not apply.

Who should consider a Rollover IRA?

  • Individuals eligible to receive a distribution from a former employer’s workplace retirement plan
  • Individuals who are retiring or changing places of employment and want to keep their retirement funds in a tax-deferred1 account
  • Individuals seeking a more diverse selection of investment options 
  • Individuals wishing to consolidate their retirement assets into a single tax-deferred account


What benefits does an IRA Rollover offer?

  • Broader range of investment options 
  • Tax-free transfer of assets
  • Continued tax-deferral
  • Asset consolidation (combine funds with other IRAs)
  • Beneficiary flexibility 
  • 72(t) payment

 

1 Income whose taxes can be postponed until a later date; examples include IRAs and 401(k) plan earnings.

Diversification does not guarantee a profit or protect against loss in declining markets.


An IRA rollover may involve the application of fees and charges to the investor.

There may be fees, expenses, taxes, and penalties associated with early IRA withdrawals.

Lord Abbett will waive (or otherwise pay) the yearly $10.00 custodial fee that would be charged each year on an ongoing basis to every new IRA account and, therefore, will not assess a custodial account fee in 2022 or any year afterward. Fund level fees and expenses are still applicable. Please see the current prospectus.

To comply with Treasury Department regulations, we inform you that, unless otherwise expressly indicated, any tax information contained herein is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed under the Internal Revenue Code or any other applicable tax law, or (ii) promoting, marketing, or recommending to another party any transaction, arrangement, or other matter.

There may be fees, expenses, taxes, and penalties associated with early IRA withdrawals.

Lord Abbett will waive (or otherwise pay) the yearly $10.00 custodial fee that would be charged each year on an ongoing basis to every new IRA account and, therefore, will not assess a custodial account fee in 2022 or any year afterward. Fund level fees and expenses are still applicable. Please see the current prospectus.

Eligibility

Eligibility

This material is intended as general information only and is not intended as legal or tax advice. Some of this information may be quite complex and we strongly suggest you consult with your advisor or tax professional based on your individual situation.

Who is eligible to open a Rollover IRA?

An individual qho separates from service or retires is generally eligible to move assets from their former employer’s workplace retirement plan into a Rollover IRA.

What type of distribution is ineligible to be transferred to a Rollover IRA?

Only Eligible Rollover Distributions from a workplace retirement plan can be moved to a Rollover IRA.

Here are a few types of distributions that are ineligible to be rolled over including:

  • Required minimum distributions (RMDs) 
  • Hardship distributions
  • Substantially equal periodic payments under Section 72(t) 
  • Corrective distributions of excess deferrals
  • Deemed distributions on a defaulted plan loan


What type of workplace retirement accounts are eligible to be moved into a Rollover IRA?

Our flyer shows which retirement accounts are eligible for a rollover.

A required minimum distribution (RMD) is the minimum amount an account owner must withdraw from a retirement account each year. An owner generally must start taking withdrawals from a retirement plan account at age 72. Roth IRAs do not require withdrawals until after the death of the owner.

There may be fees, expenses, taxes, and penalties associated with early IRA withdrawals.

Lord Abbett will waive (or otherwise pay) the yearly $10.00 custodial fee that would be charged each year on an ongoing basis to every new IRA account and, therefore, will not assess a custodial account fee in 2022 or any year afterward. Fund level fees and expenses are still applicable. Please see the current prospectus.

To comply with Treasury Department regulations, we inform you that, unless otherwise expressly indicated, any tax information contained herein is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed under the Internal Revenue Code or any other applicable tax law, or (ii) promoting, marketing, or recommending to another party any transaction, arrangement, or other matter.

How to Open a Rollover IRA

  1. Complete the writable IRA Application

  2. Send completed application to Lord Abbett Funds Services Center

  3. Feel free to use our Free FedEx shipping option

  4. You’ll receive a confirmation once your IRA is established

RELATED RESOURCES

  IRA Application
  IRA Transfer Form

Contributions

Contributions

This material is intended as general information only and is not intended as legal or tax advice. Some of this information may be quite complex and we strongly suggest you consult with your advisor or tax professional based on your individual situation.

What are the Rollover IRA contribution limits?

Rollover IRAs are designed to receive funds from a former employer’s workplace retirement plan, thus avoiding current taxation. The dollar amount a rollover IRA receives is equal to the retirement funds available from an individual’s former employer's plan. 

Do IRA Rollovers affect annual IRA contribution limits?

No. An IRA rollover does not affect an investor’s annual IRA contribution limit.

Can I combine a Rollover IRA and a Traditional IRA?

Yes. However, you are required to keep traditional IRA and Roth IRA funds in separate accounts.

 

There may be fees, expenses, taxes, and penalties associated with early IRA withdrawals.

Lord Abbett will waive (or otherwise pay) the yearly $10.00 custodial fee that would be charged each year on an ongoing basis to every new IRA account and, therefore, will not assess a custodial account fee in 2022 or any year afterward. Fund level fees and expenses are still applicable. Please see the current prospectus.

To comply with Treasury Department regulations, we inform you that, unless otherwise expressly indicated, any tax information contained herein is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed under the Internal Revenue Code or any other applicable tax law, or (ii) promoting, marketing, or recommending to another party any transaction, arrangement, or other matter.

Distributions

Distributions

This material is intended as general information only and is not intended as legal or tax advice. Some of this information may be quite complex and we strongly suggest you consult with your advisor or tax professional based on your individual situation.

What types of distributions can be taken from a Rollover IRA?

There are several different kinds of distributions that can be taken from a Rollover IRA. We discuss each distribution type below.

  • Normal
  • Premature (without an exception)
  • Premature (with an exception)
  • Required Minimum Distribution (RMD)
  • Distribution due to death
  • Qualified Birth or Adoption


What is a normal distribution from a Rollover IRA?

A normal distribution occurs after the owner attains age 59½. A normal distribution is generally subject to taxation in the year withdraw, but the 10% penalty tax does not apply.

What is a premature distribution (without an exception)?

A premature distribution (without an exception) occurs upon the owner withdrawing funds before age 59½ and none of the statutory exceptions apply. A premature distribution is both taxable and subject to the 10% penalty tax.

What is a premature distribution (with an exception)?

A premature distribution occurs upon the owner withdrawing funds before age 59½ and satisfying an exception. A premature distribution is subject to taxation, but the 10% penalty tax does not apply.

Common exceptions to the 10% additional tax on early withdrawals are:

  • Substantially equal periodic payments (“72(t)”) 
  • Disability
  • Death
  • Qualified higher education expenses
  • Pay for health insurance premiums after receiving unemployment for more than 12 weeks
  • Unreimbursed medical expenses (greater than 10% of adjusted gross income). 
  • First-time home purchase (subject to a lifetime limit of $10,000) 
  • IRS Levy
  • Qualified birth or adoption


What is a required minimum distribution (RMD) from a Rollover IRA?

The SECURE Act of 2019 changed the age of the required beginning date from age 70½ to 72. 

A Rollover IRA owner is required to take a minimum distribution the year they reach age 72. The minimum distribution rules permit the initial or first minimum distribution to be deferred1 until April 1st of the following year. Delaying a required minimum distribution requires the owner to take two RMDs the following year.

If the full RMD is not taken each year, a 50% penalty tax is assessed on the amount not taken. See our calculator to determine your annual RMD amount.

What death benefits are available from a Rollover IRA?

When an IRA account owner dies, an inherited IRA is created. However, inherited IRA treatment differs depending on who inherits the account. 

Spousal beneficiary:

Spousal beneficiary has the following options available upon inheriting an IRA:

  • Treat the IRA as his or her own IRA
  • Roll over the IRA into his or her own IRA
  • Transfer the IRA to an employer sponsored plan where he or she is a participant
  • Remain a beneficiary.


Non-Spouse Beneficiary: 

The Setting Every Community for Retirement Enhancement (SECURE) Act of 2019 introduced significant changes to long-standing rules that apply to retirement accounts inherited by a non-spouse beneficiary. The new rules apply to  beneficiaries that inherit an IRA on or after January 1 2020.

One of the most significant changes was the elimination of the ‘stretch’ provision for most non-spouse designated beneficiaries of inherited retirement accounts and the introduction of a “10-Year Rule” thus requiring certain beneficiaries to liquidate the entire balance of their inherited retirement account within ten years after the account owner’s death.

1 Income whose taxes can be postponed until a later date; examples include IRAs and 401(k) plan earnings.
 

A required minimum distribution (RMD) is the minimum amount an account owner must withdraw from a retirement account each year. An owner generally must start taking withdrawals from a retirement plan account at age 72. Roth IRAs do not require withdrawals until after the death of the owner

There may be fees, expenses, taxes, and penalties associated with early IRA withdrawals.

Lord Abbett will waive (or otherwise pay) the yearly $10.00 custodial fee that would be charged each year on an ongoing basis to every new IRA account and, therefore, will not assess a custodial account fee in 2022 or any year afterward. Fund level fees and expenses are still applicable. Please see the current prospectus.

To comply with Treasury Department regulations, we inform you that, unless otherwise expressly indicated, any tax information contained herein is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed under the Internal Revenue Code or any other applicable tax law, or (ii) promoting, marketing, or recommending to another party any transaction, arrangement, or other matter.

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