Are you looking to transfer your IRA funds from one financial institution to another? If so, you need to know the rules for an IRA rollover. The Internal Revenue Service (IRS) has set a 60-day deadline for transferring funds from an IRA or retirement plan to another plan or IRA. However, the IRS may waive this requirement in certain situations if you miss the deadline due to circumstances beyond your control. If you have a traditional 401(k) or 403(b), you can transfer your money to a Roth IRA.
This is known as a conversion to Roth, and you will need to declare the money as income when filing your tax return and pay ordinary income tax on it. You can make tax-free transfers from your IRAs at any age, but if you don't meet the required minimum annual distribution (RMD) it will be considered an excess contribution. This limit does not apply to eligible cumulative distributions from an employer plan. For example, if an entrepreneur aged 57 wants to transfer part of her IRA from one financial institution to another, but uses some of the IRA's assets to buy shares, she should write her Schwab Rollover IRA account number on the check and deposit it within 60 days to avoid taxes and penalties. The only difference is that money from an accumulated IRA can later be transferred to an employer-sponsored retirement plan if the plan allows it.
A traditional (or cumulative) IRA is generally used for pre-tax assets, as the savings will remain invested with deferred taxes and you won't owe any taxes for the actual reinvestment transaction. You can add money to your IRA with annual contributions or consolidate other IRA assets or retirement plans previously sponsored by the employer. An asset transfer occurs when you tell your retirement account provider to transfer funds directly between two accounts of the same type, such as from a traditional IRA to another traditional IRA. Within 60 days of receiving the distribution check, you must deposit the money into a cumulative IRA to avoid current income taxes. By moving directly from an employer-sponsored plan to an IRA, your plan administrator delivers your distribution directly to the financial provider where your accumulated IRA is located. If you're transferring your IRA from one financial institution to another and don't need to use the funds, you should consider using the transfer method instead of reinvestment.
This one-year limit also doesn't apply to traditional IRA transfers to Roth IRAs or Roth conversions. A reinvestment occurs when assets from an employer-sponsored retirement plan, such as a 401(k) or 403(b), are transferred to an IRA. You can transfer any money from an IRA that you saved outside of your employer-sponsored plan to a Vanguard IRA through an asset transfer.
