ll them over to a new IRA. The IRA owner is allowed only one rollover per 12-month period. This 12-month period begins the day the IRA owner originally withdraws the assets from the IRA. Once the IRA owner receives the funds, he or she has 60 calendar days to complete the rollover contribution. When doing a rollover you must know that the conversion income could push you into a higher tax bracket and disqualify you from other tax benefits such as the dependent child and college tuition tax credits (smartmoney, roth iras: to convert or not, 2000). When you are the owner of an IRA you also have the option of a Direct Rollover. A direct rollover differs from both a rollover and a transfer. Instead of moving a IRA-to-IRA, a direct rollover moves all or part of the assets form an employer sponsored plan [such as a 401(k) plan] to either and IRA or an eligible retirement plan. When you choose the direct rollover plan the federal income tax withholding of 20% is not required. All of the eligible rollover assets are paid directly to the trustee/custodian of the new plan. Another new option for saving is the Education IRA. Unlike Traditional or Roth IRAs, the Education IRA is not a retirement planning tool; it is more accurately described as an education investment account (troweprice, education iras, 2000). Education IRAs are for children under the age 18 and provide tax-free savings for higher education, as long as withdrawal conditions are met. Individuals may contribute $500 per child per year for educational savings in addition to making contributions to a Traditional IRA, Roth IRA, or employer-sponsored plan. Parents, grandparents, other family members, friends, and a child him/herself may contribute to the child’s Education IRA, provided that the total contributions for the child during the taxable year do not exceed the $500 limit (DJI webcenter, what’s hot, 2000). To be eligible for the Education IRA you must m...
