An IRA transfer occurs when money moves from one IRA account to another within the same IRA system, unlike when rolling it over into a retirement plan or other account.
An indirect rollover involves receiving a check from your employer that must be deposited into an IRA within 60 days or else be subject to taxes on it.
There is no limit on IRA to IRA transfers.
Moving funds between IRAs won’t incur taxes or penalties; however, some important details must be considered. First and foremost is ensuring you conduct a direct rollover – this means requesting that your former employer’s plan administrator send your account balance directly to your new IRA provider so as not to miss the 60-day rollover window or fail to meet required minimum distributions.
Keep in mind that only one IRA-to-IRA rollover per 12-month period can take place. This rule exists to prevent people from misusing IRAs as tax shelters for retirement investments.
Lastly, when transitioning money from one IRA into a new IRA account, be careful not to roll over the required minimum distribution (RMD). Doing so will avoid incurring income taxes on investment gains and give more flexibility with your investing strategies. You could also transfer your IRA assets into a self-directed brokerage account for greater control.
There is a limit on IRA to IRA rollovers.
The IRS imposes a one-rollover-per-year rule, which covers distributions from an IRA into another IRA account. This includes traditional-to-traditional IRA rollovers and Roth IRA-to-Roth IRA rollovers; however, direct rollovers, which involve transfers between financial institutions directly, do not fall under this regulation.
Direct rollover is a process whereby your former employer sends your distribution from their work retirement account directly to your new IRA custodian, who then deposits it within 60 days into your IRA account – this method may help those looking to avoid income taxes and early withdrawal penalties.
Indirect IRA rollovers are generally taxed events due to their indirect nature; as the funds never actually reach their account holders. A trustee-to-trustee transfer, on the other hand, remains tax-free as its proceeds never leave your IRA account. When considering indirect rollover options it is advisable to consult a tax advisor or financial professional prior to making this decision.
There is a limit on IRA to IRA consolidation.
An IRA transfer involves moving retirement savings between institutions of similar type accounts. This may be beneficial for those looking to consolidate accounts, reduce fees or switch providers – although it should be remembered that this differs from a rollover.
An IRA transfer involves the movement of funds between accounts that share similar characteristics without distribution to you, usually between financial institutions. A rollover, on the other hand, involves dispersing funds directly to you before depositing them in your new account.
Your only eligible IRA rollover per 12-month period is an IRA rollover; however, this rule doesn’t apply to 401(k) and qualified plan rollovers. To learn more about IRA consolidation, check out NerdWallet’s explainer of this topic; our writers are subject matter experts who use primary sources when writing articles on NerdWallet.
There is a limit on IRA to IRA distributions.
One of the easiest ways to transfer funds between IRA accounts is with a trustee-to-trustee transfer. You can move funds between accounts that belong to different account types (for instance from traditional to Roth) but all transfers remain non-taxable and unreported to the IRS; however, you are limited to only making one transfer per 12-month period.
Rollovers are another method for moving IRA assets around, typically when changing jobs and rolling over their employer-sponsored retirement plan into an individual IRA tax-free and not reported to the IRS. Some exceptions to this one-rollover-per-12-month rule exist for individuals experiencing large unreimbursed medical expenses, domestic abuse survivors or legal adoption proceedings and up to $10,000 may be withdrawn without penalty – otherwise any withdrawal would incur taxes and an early distribution penalty.