What Is an In-Kind Rollover?

Rolling stocks into an IRA is not difficult with the right plan.
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An "in-kind rollover" is a method of transferring non-cash funds from an employer-based retirement plan into an Individual Retirement Account. This simply means that you can authorize the movement of money into an IRA as well as stocks and other non-cash assets without liquidating them. The IRA can receive transfers of funds in non-cash form. They are merely added to the total value of the IRA that will be disbursed upon reaching retirement age.



If you are invested in an employer-based retirement plan such as a 401(k), then it is possible to move this money into an Individual Retirement Account of either the traditional or Roth variety. This transference of funds is called a "rollover." Most banks and other institutions dealing with such accounts have simple rules by which you can transfer funds into an IRA.


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When a rollover is "in-kind," it refers to the transfer of non-cash assets. This normally refers to stocks. Sometimes, an employee will be compensated with stocks and options to control those stocks rather than cash. Retirement plans can be funded in the same way. Your employer's retirement plan might include value in the form of stocks, bonds or options on stock. The purpose of an "in-kind" rollover is to transfer the stock itself from one account into an IRA.



If you leave your current employment or are laid off, you might be left with a retirement account that is attached to a firm you no longer work for. It may be in your interest, if you have stock or other non-cash assets, to move this into an IRA. Usually, the rollover is not taxed, since you are not actually receiving any income. The IRA of either variety will shelter the capital and growth of your funds until you receive your first disbursement. You will need to contact your former employer to authorize the rollover of funds.



The function of the rollover is to permit the easy movement of funds without being taxed. If you were to receive a disbursement of the entire amount of the 401(k), you might be liable to taxation, especially if you receive a check made out to you. Rolling over the account means you do not see the money; it only goes from one account into another. Stock and other in-kind investments do the same. While they are being transferred, the stock remains governed by market forces. It can go up or down in value as it is being transferred and is never outside of the market in the process.



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