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Question 6

“When you leave a job, the retirement account you accumulated at that employer becomes a short list of choices: leave it in the old plan, roll it into a new employer plan, roll it into an IRA, or take a cash distribution. Each choice has trade-offs — leaving funds where they are can be simple but may limit investment options; taking cash converts tax-advantaged savings into immediate spending money and usually triggers taxes and possible penalties; rollovers preserve tax-advantaged status and maintain continuity of retirement savings. A direct rollover specifically means the money moves directly between custodians (for example, plan A to IRA B) without passing through your bank account. Because the funds never go to you, there’s no mandatory withholding and no immediate tax event. Advisors often recommend a direct rollover when the goal is portability and preserving tax treatment, while recognizing there are situations (small balances, plan investment choices, or immediate cash needs) where other options may be chosen. This lead-in explains the practical reason many people choose direct rollovers: they keep savings working tax-advantaged and avoid surprise tax bills, making it a frequently recommended move for preserving retirement assets.”

What best describes a direct rollover when leaving a job?

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Wells Fargo was founded in 1852 and used stagecoaches to carry gold, mail, and cash across the American West.