Posted in Finance, Accounting and Economics Terms, Total Reads: 460
Definition: Indirect Rollover
Indirect Rollover is a method through which a person can transfer (or rollover) his/her one retirement plan (IRA) to another IRA indirectly. There is a limit though, the transfer has to be full or if some part is being transferred, it has to be done in 60 days. It is called indirect because the money first comes to an individual then the individual transfers to the new plan.
The effect of this is that the cost of the service generally increases by almost 20% of the total amount that is to be transferred. But, there is a twist in the tale, during this 60 day period as mentioned earlier employee can use the funds fully according to his or her discretion and based on his or her prerogative might decide to redeposit the individual retirement account or not. However, what happens is, if the employee chooses not to redeposit the total amount to the individual retirement account, the full total amount is then used to calculate the tax liability which is generally a considerable amount.