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Chapter 19. Roll, Roll, Roll It Over > Benefits of a Rollover - Pg. 186

Roll, Roll, Roll It Over 186 Rollover: Getting Old Money to Do a New Trick A rollover is a nice trick that protects your retirement savings when you leave your company. The laws that govern distributions from 401(k)s, pension plans, profit-sharing plans, and ESOPs en- courage rollovers because our government wants us to use this tax-deferred savings for retirement. Of course, governmental encouragement comes in two forms: the carrot and the stick. The carrot of a rollover is tax-deferral; the stick is hefty taxes and a penalty. Rollovers can be simple. They don't require you to do the equivalent of financial gymnastics--which reminds us of a true story. Once we had a translator convert an SPD (summary plan description) into another language. When we received the first draft, the term "IRA rollover" was translated to something that meant "IRA somersault." That's not what we had in mind! We're not talking about physical fitness here, but about fiscal fitness. When you receive a lump sum of money from your 401(k), pension plan, profit-sharing plan, or ESOP; you can generally transfer it to another tax-deferred investment--it's that simple! Our Advice