Rollover IRAs

Rollovers represent an enormous opportunity to grow your business. Gain a competitive advantage with tools and tips to attract your share of the rollover market.


Evaluate Your Client Base

According to Pershing's independent study The Secret Knock: Unlocking the Retirement Opportunity, there is a $303 billion retirement money-in-motion opportunity each year in the form of IRA rollovers, transfers of IRAs and taxable assets that are earmarked for retirement. This represents a significant opportunity for financial professionals prepared to take advantage of it.

Keep those statistics in mind when evaluating your own client base for opportunities. A key to uncovering rollover opportunities is to regularly review your client base and identify changes that could trigger a rollover like a job change or retirement.

Tips for getting the rollover:

  • Own the Retirement Solutions Provider (RSP) relationship. According to the Pershing study, once a financial professional is considered by clients to be their primary RSP, they attract more assets—81% of money-in-motion versus 50% for non RSPs as well as share of wallet (76% versus 50%).
  • Uncover rollover opportunities during annual client meetings and reviews using the Client Profile for Retirement.
    • When meeting with clients who work for larger employers in your area, use the opportunity to call the plan recordkeeper to learn as much as you can about the plan. You might find that participants, such as your client, are forced out of the 401(k) at age 65. During the client meeting, use this as a compelling reason for rolling plan assets over now
  • Use tax season to review all IRS Forms 5498s (forms showing the total contribution amount paid into an IRA throughout the year) and IRS Forms 1099Rs (forms showing the total distributions from a retirement account during the year) with clients
  • Review your client list for those employed by companies that have downsized
  • Proactively offer to review your client’s 401(k) or other type of retirement plan to build the relationship and learn more about their retirement savings
  • Create a “high-potential” list of clients who may have changed jobs or are ready to retire and talk to them about the benefits of consolidating retirement assets in a Rollover IRA

Compare Rollover Options

Your clients are faced with several decisions about what to do with their retirement plan assets.

When left to decide on their own, clients may make a decision that has serious tax implications for their retirement savings. It will be important for you to review their options, articulate the benefits of a rollover and address any objections to break through the inertia of leaving assets in an existing plan. Clients have several choices for plan assets:

Options Pros Cons
Keep in Plan
  • Tax-deferred status protected
  • May be able to take a plan loan
  • May be able to purchase employer stock
  • May have access to certain proprietary investments
  • Potential protection from creditors
  • Limited investment options selected by employer
  • Client is responsible for choosing and managing your investment options within the plan
  • Old plans are often neglected or forgotten
  • Withdrawal options and timing may be limited by the plan
  • Often left in “set it and forget it” mode
Move to new employer's plan
  • Tax-deferred status protected
  • May be able to take a plan loan based on a larger consolidated balance
  • If still working after age 70½, client may be able to defer required minimum distributions from this new employer’s plan
  • May be able to purchase employer stock
  • May have access to certain proprietary investments
  • Potential protection from creditors
  • New employer may not allow rollovers into its plan
  • Limited investment choices selected by employer
  • Client is responsible for choosing and managing investments
  • Investments from former employer’s plan may not be available in the new plan, requiring to sell them and choose from investments offered by the new plan
  • Often left in "set it and forget it" mode
Cash out
  • Gives client immediate access to retirement plan assets
  • There is a 20% mandatory employer withholding on eligible rollover distributions
  • Client may owe nearly 50% of the cash value in taxes if he or she does not deposit the funds into an IRA within 60 days of the date on the check:
    • - 10-35% for ordinary federal income taxes
    • - 5-10% for state and local taxes1
    • - 10% for early withdrawal penalty if client is under age 59½
  • Lose tax-deferred growth potential
  • Cash is not protected from creditors
Roll over to an IRA
  • Tax-deferred status protected
  • No mandatory withholding or income tax penalties
  • Extensive range of investment choices that may better meet client goals
  • Ability to continue investing in a tax-advantaged account
  • Greater flexibility available for accessing money
  • Option to convert to a Roth IRA, which may offer tax benefits2
  • You can help create a personalized retirement strategy
  • No loans allowed
  • Required minimum distributions begin at age 70½ for Traditional IRAs
  • Lose the Net Unrealized Appreciation (NUA) tax strategy for employer stock held in your former employer’s plan
  • May lose protection from creditors

1 State and local taxes will depend on your legal residence. Not all states collect income taxes.

2 You will owe tax on all pre-tax contributions and earnings in the year of the conversion. A distribution from a Roth IRA is tax-free and penalty-free provided that the account has been open for at least five years and one of the following conditions is met: the account owner is age 59½ or older, the account owner dies or becomes disabled or for a qualified first time home purchase.

Refer to the IRA Selector to help clients decide if a Roth or a Traditional IRA is right for them and get more information about each of these rollover options in the Rollover Comparison Table. Also see IRS Rollovers of Retirement Distributions on the IRS website.

Help clients by prefilling the Rollover IRA Adoption Agreement before or during your meetings.

Learn About Technical and Tax Rules

Technical retirement rules are closely integrated with current tax laws and regulations.

It is important to stay current with the latest rules and technical details to be successful building your business with IRAs and Rollover IRAs. Most decisions are irrevocable and mistakes can jeopardize the retirement security of clients.

It is important to master the following technical and tax areas before recommending rollovers:

  • Mandatory 20% tax withholding if employer plan assets are taken as a lump sum distribution
  • Process for a direct rollover—moving assets from a plan directly to the IRA
  • Process and limitations for a 60-day rollover—when clients request a distribution and receive a check made out in their name
  • Tax reporting requirements
  • Net Unrealized Appreciation (NUA) strategy for employer stock (before a rollover takes place)
  • 10% early withdrawal penalty for tapping IRA assets prior to age 59½
  • Section 72(t)—allowable exemptions from the 10% early withdrawal penalty

Use the NUA and 72(t) Distribution calculators to help with important decisions before the rollover event. Review the applicable 402(f) notice from each plan with your clients to help them understand their options.

Engage with Clients About Rollovers

Now that you are prepared for the rollover conversation, follow a few simple guidelines to help your clients take action:

  1. Focus on the benefits of rolling over to an IRA using the rollover options table
  2. Help clients pre-fill their Rollover IRA Adoption Agreement and provide guidance on who to contact at their former employer and what information they will need
  3. Discuss investment strategies that are appropriate based on each client’s situation and risk tolerance
    • A Tip from The Secret Knock: Unlocking the Retirement Opportunity
      Investors are sensitive to risk and want help managing the downside: Investors are seeking assurance that their interests are being looked after, confirmation of the financial stability and strength of their financial services provider and greater down-side protection. An increased focus on managing investors’ expectations around risk, offering lower risk and guaranteed income products and fostering trust are key drivers of acquisition and retention of retirement assets. Use Understanding the Protection of Client Assets with clients in conjunction with retirement materials.
  4. Talk to your financial organization about using a Rollover IRA statement insert in client statements as a timely reminder of the benefits of rollovers
  5. Growing your business by using seminars can be efficient and effective. Use Pershing’s Retirement Overview Seminar as a starting point to convert prospects to clients. Follow up the seminar with a discussion on rollover and other account consolidation opportunities.
  6. Update your Client Profile for Retirement after each meeting and clearly note key next steps and follow up plans.

Keep Lines of Communication Open

Rollovers go to the financial professionals who earn their clients’ trust and meet their expectations about retirement planning.

A key step in creating this trust is to contact your clients with timely, important information about retirement topics that are important to them.

Keep the conversations going:

  • Send a letter or e-mail each year to remind them about the opportunity to contribute to existing IRAs
  • Follow up meetings by sending an e-mail that recaps your conversation
  • Reach out with phone calls and e-mails to update clients on the rollover process
  • Make recommendations about retirement resources that may be of interest to clients
  • Offer three tips about how to properly fund a Rollover IRA:
    1. Have their former employer complete a trustee-to-trustee transfer of funds
    2. Make check payable to their financial organization "for the benefit of"
    3. If a client has received a check in his or her name, make sure it is sent to you within the 60-day window along with the 20% that was withheld as a tax pre-payment

Plan for the Future

Showcase your retirement knowledge in every client and prospect meeting.

When clients trust you to manage their future security, they will be more likely to consolidate their assets with you as they prepare for retirement. Clients approaching retirement, even 10 and 15 years before traditional retirement age, are looking for relevant information and clear direction.

Learn about Pershing’s ValueAlliance® program featuring LifeYield—a service your firm can partner with to evaluate your clients’ retirement income tax-efficient withdrawal strategies.

For clients between the ages of 65 and 69, help them streamline their retirement assets by consolidating and rolling over any IRAs, 401(k)s, and other retirement accounts with you before Required Minimum Distributions begin.

Download The Secret Knock: Unlocking the Retirement Opportunity now to learn concrete methods to help your clients in a period of great change—one in which “readying, preparing and guiding investors in their retirement planning, investing and distribution strategies will be the big play for the next decade.”

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