Penalties for Rollovers?

[Guest KOlsen]

An investment firm newsletter states that a disadvantage of moving money into a rollover IRA is that "a penalty may apply if moving assets out of a previous plan." Does anyone know what this is talking about? Thanks.

[Michael Devault]

Having not read the newsletter, I can't say for certain. However, I suspect that they're talking about surrender charges, withdrawal penalties, back end loads, etc. that a particular funding medium might impose if the money is taken out too soon. The penalty isn't imposed by the Internal Revenue Code, but rather the specific IRA instrument.

Hope this helps.

[Guest KOlsen]

Thanks for the assistance. It has been my understanding (am I wrong?) that employers cannot assess penalties for roll-overs or even apply administrative charges against the individual account to perform roll-overs. So, if I am correct, I take your response to mean that the source of such penalties you mention would be just the investment instrument, right? Like a fund that applies a penalty if you don't hold its assets for long enough? Just double-checking. Thanks again.