Anyone with a qualified retirement plan (e.g. 401(k), pension plan) who quits, retires or experiences a plan termination is allowed to rollover their old plan to a Traditional IRA.
If your plan balance is directly rolled over to an IRA, you will pay no tax or penalties and your money can continue to grow tax-deferred.
You can continue to add money to your IRA and receive an income tax deduction for the contribution (subject to limitations).
An IRA, or individual retirement account, is a tax-deferred savings account that allows any individual with earned income to make regular contributions towards their retirement.
In an IRA, you can invest in a variety of assets: CDs, stocks, bonds, mutual funds, etc.
You pay no taxes on the account until a withdrawal is made. Once a withdrawal is made, it will be taxed at your ordinary income tax rate.
If you’re under age 59 ½, then you may be subject to a 10% penalty on the amount of the withdrawal, and the amount of the withdrawal will still be taxed at your ordinary income tax rate.