Though partial rollovers are legal under IRS rules, it’s wise to understand their effects before undertaking one. Partial transfers may occur through direct or trustee-to-trustee transfers.
As soon as they leave a job, employees may wish to partially rollover their IRA because this typically provides more investment options than their company-provided retirement plan.
What is a partial rollover?
When it comes to rolling over funds from an employer-sponsored retirement account such as a 401(k), 403b or 457b, there are various methods available. You could conduct either a direct rollover with a financial institution, or do an indirect rollover through banks, brokerage firms or online investing platforms – the best decision will depend on where you stand financially now and when the funds become necessary for use.
Rolling over all or part of your 401(k) into an IRA may make sense because there is typically more investment choice outside your employer-provided plan with providers like Alto than within it; however, keeping part of it inside may still prove useful depending on which investments aren’t readily available elsewhere.
How can I do a partial rollover?
A partial rollover involves moving some funds from one retirement account or plan to another with similar tax treatment, for instance from pretax accounts into other pretax accounts rather than post-tax Roth IRAs. According to IRS regulations, such a transfer is permissible.
If you opt for an indirect rollover, withdraw your distribution check from your employer’s plan, endorse it and deposit it within 60 days into a new IRA. However, due to tax withholding requirements by your original financial institution (20%) will need to be withheld and you must then account for this sum before making your deposit.
Some individuals opt for partial rollovers in order to reduce upfront tax bills and to expand investment choices available within their IRAs. It may prove especially advantageous for those close to retirement who fall within low tax brackets.
Can I do a partial rollover to Alto?
Rollovers are relatively straightforward: open an IRA with a new custodian and notify the old one that you intend to transfer your money – depending on the type of account, this can either be accomplished directly between trustees or indirectly via endorsing distribution checks and depositing them within 60 days into your new account.
Advisors say investment fees are often a main driver in retirement rollover decisions, especially among employer-sponsored plans. Such funds tend to have lower annual fees because investors pool together into one plan and benefit from economies of scale.
Alto offers two alternatives to individual retirement accounts with fees that may be much higher: its CryptoIRA and IRA accounts give access to over 150 coins, while our partners allow investing in alternative assets like private equity, real estate and fine art investments. We will work directly with your current custodian to acquire funds on your behalf before depositing them directly in your Alto account.
Can I do a partial rollover to another custodian?
An incomplete rollover can be accomplished in various ways. One approach is known as direct rollover; here, your old financial institution sends directly to your new institution with instructions that it be rolled over into an IRA or 401(k).
An alternative way of partial rollover is transferring between financial institutions using trustee-to-trustee transfers. Many clients often prefer this approach, since it reduces the 60-day window and allows for more precise allocation.
Finally, traditional withdrawal can also help facilitate partial rollover. We advise against this option as it could trigger taxes and penalties if you are under age 59.5; to best understand your options before proceeding. Please consult a qualified advisor first before taking this course of action.
