Moving your IRA balance to a different institution/custodian or transmitting your retirement assets to an IRA from a different type of account, like a 401(k) or 403(b) is a easy and that option is built right into an IRA — thanks to the direct transfer and rollover options.
This is not applicable to converting a traditional IRA to a Roth IRA. You can't move money between the two varieties of accounts without triggering a tax bill on the amount converted.
Direct transfers
In most cases, a direct transfer will be the best way to move your IRA money.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
It's simple: You instruct your current IRA sponsor to pass the money directly to another sponsor of your choosing. The money in the account never actually passes through your hands.
You can transfer all the funds in your IRA or only a portion. And you can make as many moves as you want. You could, for example, order $30,000 in a bank IRA transferred in $10,000 chunks to three separate mutual funds.
How to do it
Open an account with the new sponsor you've selected. You needn't deposit any money right away. Instead, you'll fill out a form with instructions to the old sponsor for transferring your funds to the new account.
While the direct transfer is the easiest method, it's not necessarily the fastest. Some transfers take weeks or, in some cases, months. Barring any hitches, though, three weeks should be ample time to complete a direct transfer. If you haven't gotten confirmation within that time, call both the new and old IRA sponsors and request a definite answer about what is causing the delay and when it will be resolved. If nothing happens, talk to a supervisor and follow up in writing.
Rollovers
The second way to move your IRA is with a rollover. In this case you're the go-between. The current sponsor closes the account and sends you the money. You're then responsible for sending it on (rolling it over) to a new IRA sponsor.
This method has two advantages:
- Speed. Because you take control, you can personally push things along.
- Flexibility. Because the rules grant you 60 days to complete your rollover, you can, in effect, tap this money for a 60-day loan to meet a short-term financial emergency.If you miss the 60-day deadline, the IRA tax shelter dissolves, the money withdrawn from a traditional account is taxed (except for already-taxed contributions) and, if you're younger than 59½, you'll be hit with a 10% early-withdrawal penalty.If you miss the deadline on a Roth rollover, you can be taxed and penalized on any amount that exceeds your contribution to your Roth accounts.
Warning! Make sure the old sponsor knows you're rolling over your IRA so that 10% of the money won't be withheld for taxes. Ask whether any documents must be signed to prevent withholding.
Also note that you are permitted to do only one rollover just once every 12 months for all the IRAs that you have.
-
Here's How To Get Organized And Work For YourselfWhether you’re looking for a side gig or planning to start your own business, it has never been easier to strike out on your own. Here is our guide to navigating working for yourself.
-
How to Manage Risk With Diversification"Don't put all your eggs in one basket" means different things to different investors. Here's how to manage your risk with portfolio diversification.
-
COVID Hospitalization Rates See an Uptick As Winter Looms — The Kiplinger LetterThe Kiplinger Letter A new Omicron booster is available, but the elderly are still at risk and winter is right around the corner.
-
Will Weight-Loss Drugs Spike Medicare Costs?: The Kiplinger LetterEconomic Forecasts Lawmakers are trying to get weight-loss drugs like Wegovy covered by Medicare. Long-term savings are possible, but it could cost the program $27 billion.
-
Greenland, U.S. Plans to Boost Tourist Economy: Kiplinger Economic ForecastsEconomic Forecasts A U.S. congressional effort could see some Canadian visitors get longer stays, meanwhile, Greenland bids to be the next vacation hotspot.
-
Medicare Drug Price Negotiations Latest: Kiplinger Economic ForecastsEconomic Forecasts Medicare drug price negotiations: Early signs have emerged of how these key talks will be handled.
-
Forces That Affect Your Estate Planretirement From probate and ownership division to the taxing arm of Uncle Sam, here are four things that can influence what happens to your belongings.
-
Make a Plan for Your Retirement Savingsretirement The first step to effectively using your 401(k) is to assess your retirement needs.
-
What to Ask Before Buying an Annuityinsurance If more people understood these confusing products, fewer probably would be sold. Find out what you need to know.
-
Tapping Your IRA in Retirementretirement You can cash in your IRA all at once, but doing so could subject you to an enormous tax bill. You'll probably do better tax-wise by taking out as little as necessary each year.
