Most early retirement payments you receive from a retirement plan or IRA can be “extended” by depositing the payment into another retirement plan or IRA within 60 days. You can also have your financial institution or plan transfer payment directly to another plan or IRA. Transferring funds from one traditional IRA to another can be done through an IRA rollover. For the transaction to be considered a rollover, the money that is transferred must be withdrawn from the old account and deposited into another account within 60 days
.
Failure to comply with the rules can be costly as you can lose your tax status on the rollover funds. For example, you can easily transfer your money or assets from one institution to another institution from a traditional IRA. The account is a traditional IRA at the start of the transfer and a traditional IRA at the end of the transfer process. This also applies to other accounts, such as a Roth IRA or a SIMPLE IRA.
The only exception to this rule is that a SIMPLE IRA can also be transferred to a traditional IRA after being a SIMPLE IRA for two years. A second transfer from IRA to IRA in a single year could have tax consequences, as the transfer is subject to income tax, a 10% fee if paid out early, and a contribution tax of 6% per year if that transfer remains in the IRA. Additionally, other rules may apply if you have a nontraditional IRA, such as a SIMPLE IRA or a SEP IRA. An IRA transfer can be made directly to another account, and IRA transfers can also include liquidating funds to deposit capital into
a new account.
Also note that you can only make one tax-free transfer from one IRA to another IRA account in one year. Regardless of the number of IRAs you have, you may only transfer one distribution from one IRA (Traditional IRA, Roth IRA, or SIMPLE) in a 12-month period. Direct transfers don’t require withholding funds for taxes, as the funds go straight into your IRA. Many people use rollover IRAs to consolidate previous employers’ plans and access a wider range of investment options
.
An IRA transfer refers to the movement of funds between the same account types without the IRA being distributed to you. Investors who convert a traditional IRA to a Roth IRA must pay the income taxes associated with the traditional IRA before they can deposit funds into a Roth IRA. An IRA transfer (which is not the same as an IRA rollover, although the terms are sometimes used interchangeably) refers to the transfer of money from an individual retirement account (IRA) to another account. Consider a direct rollover if you leave a job where you participated in a company retirement or profit-sharing program, such as a 401 (k) or Thrift Savings Plan (TSP), and want to transfer your money to a Navy Federal
IRA.
Within 60 days of receiving the payout check, you must deposit the money into a rollover IRA to avoid ongoing income taxes. An IRA rollover is the transfer of funds between any type of retirement account to an IRA and can be either direct or indirect. Transferring to IRAs also allows you to maintain the tax-protected status of your retirement savings while maintaining complete control over your investment choices and
account access.
