Can You Roll an IRA Into Another IRA Without Penalty?

If you withdraw the funds, they become taxable and could potentially trigger a 10% penalty as well.

However, you can bypass income taxes and penalties by rolling your funds over into another IRA within 60 days via either direct or indirect rollover.


There are various rules related to IRA rollovers, depending on how and from where the money is transferred. Direct rollovers from employer-sponsored plans into new or existing IRAs could incur tax liabilities if not handled properly.

One key point about indirect IRA rollovers is that your money must be fully deposited into the new IRA within 60 days from being withheld in taxes – which typically accounts for 20% of total distribution – as this would then count towards income and could trigger an early withdrawal penalty of 10%, should it come before age 59 1/2.

Importantly, it’s also crucial to remember that only one indirect IRA rollover may take place per 12-month period in total across both traditional and Roth IRA accounts – this applies equally for direct transfers between accounts versus indirect rollovers.

Assuming you follow all necessary procedures when rolling over a direct or indirect IRA, trustee-to-trustee transfers are the best way to avoid making errors with direct and indirect rollovers. Even so, it is crucial that all paperwork and account information be read thoroughly prior to initiating any transfers; firms sometimes make errors like depositing your rollover into a non-IRA instead.

Not only should you understand IRA rollover tax rules, but you should also be cognizant of fees and expenses related to moving assets between accounts in an IRA – including sales loads, commissions and any expenses from mutual or exchange-traded funds containing your retirement savings – but there may be additional plan or account fees such as administrative costs or account set-up fees that must also be considered when moving funds around between IRA accounts.

Indirect rollovers

When moving funds between retirement accounts, there are two general methods of transfer. Direct and indirect methods offer different approaches; direct allows IRA owners to consolidate savings quickly while bypassing tax withholding; however it may not always be suitable.

When receiving retirement funds from an account such as a 401(k), 403(b), defined benefit or Thrift Savings Plan or an IRA, the manager of that account is required by law to withhold 20% for taxes. You can avoid having these withheld by depositing the full distribution into another account within 60 days – otherwise it will be treated as an early withdrawal and subject to income taxes and possibly an additional 10% penalty if you’re under age 59 1/2.

Indirect rollover involves having the company managing your IRA send a check for the distribution amount, then giving you up to 60 days to deposit it into a new account. Although more manual and less common than direct transfers, indirect rollover may provide temporary relief in terms of cash flow needs. It could also help if your first required minimum distribution (RMD) falls prior to age 59 1/2; you could delay taking it with this approach.

Due to their complex nature, indirect rollovers are vulnerable to human error, prompting the IRS to place restrictions on how often one may execute this type of rollover. Individuals typically can execute one indirect IRA-to-IRA rollover every 12 months regardless of how many traditional, Roth and SEP IRAs they own – regardless of type – including traditional, Roth, SEP and DRIP IRAs they may own. For more information about indirect rollovers speak with a Thrivent Financial advisor for advice regarding pros/cons; they will help make informed decisions that will help reach retirement goals faster.

Raymond Banks Administrator
Raymond Banks is a published author in the commodity world. He has written extensively about gold and silver investments, and his work has been featured in some of the most respected financial journals in the industry. Raymond\\\'s expertise in the commodities market is highly sought-after, and he regularly delivers presentations on behalf of various investment firms. He is also a regular guest on financial news programmes, where he offers his expert insights into the latest commodity trends.

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