Although many people refer to an IRA Rollover as a “thing” that you buy, as in “I just bought a new IRA Rollover.” Truth is a rollover is really something that you “do” to an existing IRA or other qualified plan.

To do a rollover, essentially you take money from one IRA (or other qualified plan) and ROLL it into another IRA (or other qualified plan). It’s used so you can move this qualified money that you and the IRS have earmarked for your retirement without owing any income taxes or penalties.

The word rollover does double duty when it comes to IRAs.

Example #1:

If you close one IRA account and get a check for the amount of your account payable to you, and invest that amount in another IRA elsewhere within 60 days, you're “rolling” your IRA over. As long as you get that money reinvested in another IRA within that 60-day “walking around” window, you won’t have to pay any income tax or tax penalties at that time. (You’ll still owe income taxes at retirement, sorry.)

Example #2:

You can also do a rollover with a lump sum payment from a qualified retirement plan. This is one of the most common types of rollovers. Generally referred to as a "Direct Rollover" or “trustee-to-trustee transfer” this one works a little differently than a regular IRA rollover.

In this case the check from your old IRA or retirement plan is specifically made out to the new IRA custodian or new employer’s plan rather than to you personally. If the check is made payable to you, your previous employer must withhold 20% to prepay your federal income tax liability. You may also face a 10% income tax penalty on the withheld money if you are under age 59 ½ and you are unable to replace the funds that were withheld within 60 days.

If you have that check made payable directly to your new plan, you can save yourself a LOT of aggravation.

If you’re moving money from IRA to IRA, you can do a rollover once every 12 months. (a traditional to a traditional or a Roth to a Roth). You may choose to do this for any number of reasons, including consolidating multiple IRA accounts, changing providers, improving your investment choices, lowering your fees, etc.

You may generally do a rollover from your employer sponsored qualified retirement plan when there's a change in your employment status or private life.

You may consider rolling into an IRA from your employer’s retirement plan if any of the following apply to you:

You usually have the option of leaving your retirement funds with your previous employer. Some employers make you take your account value with you if it’s less than a certain amount or if your previous employer gets sold.

If your new employer permits, you may be able to take your money directly from your old employer and put that money to work in your new employer’s plan. Because any employer-sponsored plan will restrict you to the investment options for that plan, a “rollover” IRA may offer you greater choices in your investments and the best opportunity to diversify, however, expenses and fees may be higher with an IRA.

You should consult a your tax advisor before you decide to rollover an employer sponsored retirement plan into an IRA, as some payouts from employer plans are not qualified to rollover and tax laws change frequently. Also, each employer plan has its own requirements so be sure you check with before you take any action.

ING has a number of product solutions specifically targeted to meet the needs of people changing jobs and looking for rollover solutions. A financial professional can then help you make investment choices and complete the required paperwork, if you decide that doing a Direct Rollover or transferring your IRA is what you want to do.