Question 9
“When deciding what to do with a retirement account after leaving a job, the option to do a direct rollover is often presented because it preserves tax advantages and avoids immediate tax consequences. A direct rollover moves retirement savings straight from one custodian to another without the account owner receiving the funds; that avoids the mandatory withholding that typically occurs if you take the money personally. Keeping funds in a tax-advantaged wrapper means they continue to grow tax-deferred (or tax-free for qualified Roth accounts) rather than becoming taxable income. Additional benefits can include easier consolidation of accounts for simpler recordkeeping and the chance to access different investment options. While rollovers are not always the perfect choice for every situation, understanding this core advantage — avoiding immediate taxes and preserving the account’s tax status — is essential when weighing alternatives such as cashing out or leaving money behind.”
Which advantage most directly results from performing a direct rollover instead of cashing out?
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By Wise Wallet
Paying only the minimum on credit cards can stretch repayment for years and multiply the total interest paid.