What is the term for transferring funds from one retirement plan to another without taxes or penalties?

What is the term for transferring funds from one retirement plan to another without taxes or penalties?

• A. Withdrawal
• B. Conversion
• C. Rollover
• D. Annuity

Answer: (C)

Rollover. The idea is to move assets from one retirement plan to another without triggering taxes or penalties by preserving the tax‑deferred status. This happens most cleanly with a direct rollover—trustee to trustee—so the funds never pass through your hands. Even an indirect rollover can work if you redeposit the money into another qualified plan within 60 days, avoiding taxes and penalties, though it carries more risk and potential complications. This differs from a withdrawal, which takes cash out of the plan and is usually a taxable event (and may incur penalties if you’re under age 59½). A conversion involves changing the type of retirement account (like traditional to Roth) and typically triggers taxes on the amount converted. An annuity is a product that provides a stream of payments and isn’t itself a transfer between retirement plans.

Rollover. The idea is to move assets from one retirement plan to another without triggering taxes or penalties by preserving the tax‑deferred status. This happens most cleanly with a direct rollover—trustee to trustee—so the funds never pass through your hands. Even an indirect rollover can work if you redeposit the money into another qualified plan within 60 days, avoiding taxes and penalties, though it carries more risk and potential complications.

This differs from a withdrawal, which takes cash out of the plan and is usually a taxable event (and may incur penalties if you’re under age 59½). A conversion involves changing the type of retirement account (like traditional to Roth) and typically triggers taxes on the amount converted. An annuity is a product that provides a stream of payments and isn’t itself a transfer between retirement plans.