What is a Rollover IRA, and Do I Need One?

What is a Rollover IRA, and Do I Need One?  

Generally, the term "rollover IRA" refers to an IRA that you establish to receive funds from an employer retirement plan like a 401(k). A rollover IRA is also sometimes referred to as a "conduit IRA."

When you roll funds over from an employer plan to an IRA, your financial institution may suggest that you use a rollover IRA to receive the funds. Of course, you can transfer those dollars to any other IRA you own at some future date, because there's no legal requirement that you keep your plan distribution in a separate IRA. But even though separate IRAs are not legally required, there are at least two reasons to consider keeping your employer plan rollover separate from your contributory IRAs.

1. To maintain a separate rollover IRA deals with federal bankruptcy law. Your IRAs are protected from your creditors under federal law if you declare bankruptcy, but this protection is currently limited to $1.36 million for all your IRAs.1 The $1.36 million limit doesn't apply, though, to amounts you roll over to an IRA from an employer plan, or any earnings on that rollover. These dollars are protected in full if you declare bankruptcy, just as they would have been in your employer's plan. Obviously, it's easier to track the amount rolled over, and any future earnings, if you keep those dollars separate from your contributory IRAs. So a rollover IRA may make sense if creditor protection is important to you.

2. To maintain a rollover IRA is that you might decide in the future that you want to roll your distribution back into a new employer's plan. In the distant past, employer plans could accept rollovers only from rollover (conduit) IRAs — rollovers from contributory IRAs weren't permitted. Now, however, employer plans can accept rollovers from both contributory IRAs and rollover IRAs.2 Despite this, employer plans aren't required to accept rollovers, and they can limit the types of contributions they'll accept. And while it's becoming less common, some still accept rollovers only from rollover IRAs. So keep this in mind if you are contemplating a rollover back to an employer plan in the future.

If you're interested in getting more information about a rollover IRA, our CFS* Financial Advisor, Corby Smith, is available to help you. Please call Corby at 281.420.4136, email him or visit crcu.org/investments to schedule an appointment. 


Meet Corby Smith, Financial Advisor with CUSO Financial Services, L.P.*

Corby Smith headshot

CUSO Financial services logo

CRCU Investment logo

Corby Smith

CFS* Financial Advisor
CUSO Financial Services, LP*
Vice President 
Community Resource Credit Union
2900 Decker Drive
Baytown, TX 77521


With over 20 years of experience, Corby offers complimentary financial reviews and will help you design a plan specific to your goals. Each of our members have a unique set of challenges and opportunities for their future retirement. Whether it's growth, retirement income or a child's education, he is always available to help you make more informed decisions about your financial future. Corby Smith has a Bachelor of Science, Mathematics Degree from University of Houston, and is registered through CUSO Financial Services, L.P.*

We offer:

  • Retirement planning
  • Risk and portfolio analysis
  • Asset allocation
  • Income strategies
  • Investment strategies
  • Life and long-term care insurance
  • Estate planning
  • Wealth transfer strategies

*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (CFS), a registered broker-dealer (Member FINRA/SIPC). and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Community Resources Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.

Registered Representatives are registered to conduct securities business and licensed to conduct insurance business in limited states. Response to, or contact with, residents of other states will be made only upon compliance with applicable licensing and registration requirements. The information in this website is for U.S. residents only and does not constitute an offer to sell, or a solicitation of an offer to purchase brokerage services to persons outside of the United States. 

Before deciding whether to retain assets in an employer sponsored plan or roll over to an IRA an investor should consider various factors including, but not limited to: investment options, fees and expenses, services, withdrawal penalties, protection from creditors and legal judgments, required minimum distributions and possession of employer stock.

Not NCUA Insured logo

1SEP and SIMPLE IRAs have unlimited protection under federal bankruptcy law. This amount is scheduled to increase in April 2022.

2Nontaxable traditional IRA dollars can't be rolled back into an employer plan.