What is a rollover and how can I execute it?

What is a 'Rollover'?

A rollover can occur in a number of ways and acts as a premium on the price of the investment

  1. When reinvesting funds from a security that have come to maturity date into a new issue of the same security or even a similar security

  2. Transferring the holdings of one retirement plan to another without paying tax on the movement

  3. Moving a forex exchange to a subsequent delivery date.


 

Rollovers are a way of making money on specific transactions, such as immediate income from day trading, or for saving on taxes. Brokers will often charge rollover fees for investments held longer than intraday (which may be past 4 pm EST.)

Trading and Rollovers

A significant point about rollovers is that they may be positive also. Rollovers involving a currency exchange for example. If there is an interest rate difference that is significant, then there may a positive value for the rollover on one side of the exchange such as buying it.


The Pros and Cons

Many financial advisors will advise you not to rollover your retirement plan. In many cases, the particular criteria are so important that gaining a tax break on your retirement fund will be difficult.

Even if you are moving to a new company, there may be cases where it is better to leave your retirement plan to your previous employer rather than doing a rollover to the IRA.

For instance, while the IRA offers far more independence, the company plan has the advantage of group buying power. Also more monitoring and possibly group investment benefits. Doing it all by yourself will take far more time and skill.