When it comes to IRAs, there are two different ways to rollover your assets between different IRA accounts. The first is what’s known as a transfer, or direct rollover. In this rollover process, one financial institution sends a request to the other for a transfer and the disbursing institution sends a check in return. Because the funds are never transferred to the IRA account holder, the process is not considered to be taxable by the IRS.
The second form of rollover is known as an indirect rollover, or a 60 day rollover. In this case, the original financial institution makes out a check directly to the IRA holder, who must then deposit this IRA rollover contribution into the receiving institution within 60 days. If this deadline of IRA rollover isn’t met, the funds will lose their status as IRA funds, meaning that they may be taxed as ordinary income and subject to additional penalties. Continue reading →
Once you’ve found an IRA rollover account that will work for you, you’ll need to determine how to set up the distribution of funds. Generally, there are two different rollover methods for getting the money out of the existing IRA account and into the new one – go over both IRA rollover types before making your final decision.
The first type of rollover called an IRA direct rollover and involves your retirement contributions between the two financial institutions. Your only involvement in the process is to open up the new IRA rollover account and complete some simple paperwork. After that, your new account provider will issue an order to transfer the money to the new account. As long as you’re not doing a direct rollover to Roth IRA, there won’t be any taxes withheld.
On the other hand, if you complete an indirect IRA rollover, the money isn’t issued to the bank, but is given to you in the form of a check. Twenty percent of the total will be withheld off the top for taxation purposes to ensure that you deposit the money into another qualified rollover IRA account. If you do this within 60 days, the withheld funds will be released into the new rollover IRA. However, if you don’t make the deposit within 60 days, the remaining 20% will be used to settle your tax bill, as the IRS will judge the rollover to be a taxable cash withdrawal. Continue reading →
A rollover IRA allows you to consolidate all of those old accounts into one new one, making it easier to manage your investment options and plan for retirement. In addition, most rollover IRA accounts offer a wider range of investment opportunities than your old employer’s plan Continue reading →