6 IRA Rollover Tips

Tip 1: Invest your IRA rollover assets

If you are looking to roll over money from an existing retirement plan, you may want to consider reallocating your assets into a new group of investments*. The decision you make today can affect your financial wellbeing in the years to come. As a result, when it comes to these important decisions many people choose to work with an investment professional. We can be a valuable resource, as we can review your specific needs and develop a strategy geared toward achieving your long-term goals. We can also monitor the performance of your retirement portfolio over time, and help you make periodic adjustments to your asset allocation strategy when appropriate.

If you're leaving your company and have a large portion of your retirement plan assets in the company's stock, you have several options and opportunities. You may find it advantageous from a tax standpoint to withdraw your company stock shares, while rolling the rest of your non-stock assets into an IRA.


Tip 2: Consider your time horizon

The amount of time you have before you start accessing your retirement money is important. If you don't need to tap into your retirement nest egg for many years, you'll likely want to take a different approach to your investments than someone who will need his or her money sooner. This is because, historically, the longer you hold your investments, the lower the volatility, and the better the potential to realize positive results. Therefore, if you have a longer-term time horizon, you may be in a position to invest more aggressively as you may have the ability to ride out market volatility.

On the other hand, if your time horizon is just a few years, you may want to take a relatively more conservative approach.


Tip 3: Balance the risk and reward

When it comes to investing, there's no such thing as "no risk." Your individual threshold for investment risk—the amount of market fluctuations that you can accept—will play an important role in deciding how you should allocate your assets. While history doesn't always repeat itself, in general, the riskier an investment, the greater the potential for reward.


Tip 4: Account for inflation

Your plan will also need to account for inflation because even a modest amount of inflation can substantially affect the amount of money you'll need to save for retirement. Your investment professional may recommend that you hold a portion of your assets in growth vehicles, even during your retirement years, so that you can potentially stay a step ahead of rising costs.


Tip 5: Diversify your assets

Knowing exactly where to invest your assets is no easy task. There are thousands of mutual funds to choose from that invest in virtually every sector of the stock and bond markets. Allocating your assets based on performance alone is often ill-advised. That's because one year a particular asset class can be a star performer, only to severely under-perform the next year. As a result, it's often best to diversify your assets among a number of different asset classes. Please keep in mind though that diversification does not assure a profit or protect against loss.


Tip 6: Avoid market timing

When you allocate your retirement assets, it may be tempting to periodically move your money into only those investments that have recently provided the strongest returns. Or you may choose to sit on the sidelines during periods of market volatility. Both of these strategies are known as market timing. While it may sound easy, historically the financial markets have never stood in place too long. And focusing on yesterday's winners or missing just a few days of strong market returns can dramatically impact your investment results.



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