A Rollover IRA is a type of Individual Retirement Account designed for people who have changed jobs or retired and have assets accumulated in their employer-sponsored retirement plan. Eligible distributions from such plans can be rolled over directly into a Fidelity IRA without incurring any tax penalties, and assets remain invested tax-deferred. You can consolidate multiple retirement accounts into a single Rollover IRA to simplify your retirement savings and make it easier to allocate and monitor your assets. You can add money to your Rollover either annual contributions or additional employer-sponsored retirement assets. Some people choose to make their annual contributions to their Rollover IRA so that they only have to keep track of one account. This may be right for you if you have no desire to roll these assets back to a qualified retirement plan at a future employer. Assets can be commingled and still be eligible to roll into another employer plan in the future; however, it is at the discretion of the receiving plan to determine what type of assets can be rolled over. Rolling over eligible distributions directly to a Rollover IRA or Traditional IRA allows you to avoid a possible 10% early withdrawal penalty, mandatory 20% withholding for federal income taxes, and to postpone paying taxes on the amount rolled over until it is withdrawn from your IRA. You'll also continue to accumulate any earnings on your rollover assets on a tax-deferred basis. To avoid the 20% mandatory withholding for federal income taxes at the time of distribution from your employer's plan, you must directly roll over your eligible distribution into a Rollover IRA or other eligible retirement plan. Consider keeping your Rollover IRA funds separate from your Traditional IRA assets if you may want to invest your Rollover IRA assets in another employer-sponsored plan in the future.