Can You Do a Partial Transfer of an IRA?
When switching IRA sponsors, direct transfer is the simplest solution. This bypasses distribution checks with 20% mandatory withholding tax (if cashing out), and possibly early withdrawal penalties if under 59.5.
However, you may opt to transfer only part of your Thrift Savings Plan into an IRA provider with reduced fees or expanded investment choices – this process is known as partial rollover.
If you’re thinking of changing IRA custodians, there are three methods available to you for moving your balance: rollover, trustee-to-trustee transfer or electronic direct transfer. Of these options, electronic direct transfer should provide the fastest, safest, and most convenient method of moving the account; the new sponsor should be able to complete it within three weeks; should any issues arise, ensure communication with both financial institutions involved as soon as possible and get an update as to when completion can be expected.
Rollover In order to complete a rollover, your old IRA custodian will send you a check with the distribution amount. Within 60 days, this check must be deposited into your new IRA to avoid incurring taxes and penalties.
Direct transfers are similar to rollovers; however, your new IRA custodian will instead transfer funds directly from one account to the other without sending you a check. It may be preferable if you need to move a large sum quickly without waiting 60 days or having to worry about misplacing one of those checks!
One of the biggest mistakes people make when rolling over an IRA is depositing the check prior to the 60-day window closing, which may cause the IRS to consider this transfer as taxable distribution and subject it to taxes on both pretax contributions and earnings, plus possibly incur a 10 percent penalty if under age 59 1/2.
Trustee-to-Trustee Transfer mes A trustee-to-trustee transfer is an alternative way of rolling over an IRA that only applies to these retirement savings accounts. It’s the safest method, since no check will need to be mailed directly to you; rather, your old custodian sends funds directly to your new IRA custodian, who then transfers them over directly for investment purposes according to your instructions – with one transfer allowed per year by IRS regulations.
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