401(k) Rollover Process Can Be Misleading, Report Says

According to the Investment Company Institute, IRA assets were $5.1 trillion by mid-year 2012, accounting for 28 percent of U.S. retirement assets.

"Despite the growth in IRA rollovers, very little is known about how the distribution process of 401(k) plan savings came to be centered on rolling savings into an IRA," the agency wrote to the Senate. "Our past work has highlighted concern that 401(k) plan participants may be encouraged to roll over plan balances to IRAs without understanding or considering other options."

Created by the Employee Retirement Income Security Act of 1974, the GAO said IRAs were established for two purposes. First, they provide a way for individuals not covered by a pension plan to save for retirement. Second, the GAO said they give retiring workers or those changing jobs "a way to preserve assets from employer-sponsored retirement plans by allowing them to roll over, or transfer, plan balances into IRAs."

The Taxpayer Relief Act of 1997 created the Roth IRA, which allows individuals to make contributions that are not tax-deductible. After five years, distributions made after age 59½ are not subject to income tax -- beyond what was already paid on contributions, the GAO said.

Page
  • 1
  • |
  • 2
Join the Discussion
You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus
 
You Might Also Like...
See It, Share It
PHOTO: Sabrina Allen is shown in this photo provided by the National Center for Missing and Exploited Children.
National Center for Missing and Exploited Children
PHOTO: Adam Sandler arrives at the premiere of Men, Women & Children at The Directors Guild of America, Sept. 30, 2014, in Los Angeles.
Dan Steinberg/Invision/AP Photo
Lovable Panda Triplets Get Named
ChinaFotoPress/Getty Images
PHOTO: Video recorded Sept. 21, 2014 in Okanogan County, Wash. shows a black bear scratching its back against a tree.
Washington Department of Fish & Wildlife