Can You Roll an IRA Into Another IRA Without Penalty?

Can you roll an IRA into another IRA without penalty

An IRA rollover is the process of moving retirement savings from one account to another and allows you to bypass mandatory 20% income tax withholding and investment surrender fees that come with distributions. There may be restrictions as to how often an IRA-to-IRA roll can occur during any given year, however.


Rollovers are transfers that move funds from retirement plans into another tax-qualified savings vehicle, such as Traditional IRAs, SEP IRAs or SIMPLE IRA plans, as well as previous employer 401(k) savings plans. Distributions must typically be transferred within 60 days – otherwise you will incur taxes on pretax contributions and earnings that have accrued to date.

Direct transfers between IRAs are the most efficient method, as these trustee-to-trustee transfers avoid the one IRA rollover-per-year limit set forth under Internal Revenue Code Section 408(d)(3). Unfortunately, however, this restriction doesn’t apply when moving money indirectly between accounts; although this seems strange since it serves no obvious tax-policy purpose. It would still be wise to limit indirect rollovers to once annually as this will help limit your tax liabilities.


Fees associated with moving retirement savings between accounts can eat into your savings and leave less for compound growth over time. One way to circumvent these charges is through direct rollover, whereby your 401(k) company sends a check directly to an IRA custodian or brokerage, who then sends it onward to your IRA account – this type of transfer doesn’t count against your one-per-year limit and fees charged are reduced or eliminated entirely.

Deciding between direct rollover or transfer can be tricky when moving from one employer plan to the next, particularly when switching employers. When making this decision, it is crucial to compare fees and investment options; typically IRAs offer greater investment options compared to your prior employer plan, and may have lower fees compared with typical 401(k). According to Kaleb Paddock from Ten Talents Financial Planning in Parker Colorado a certified financial planner says you should weigh both options thoroughly before making your final decision.

Rollover options

An IRA rollover is the transfer of retirement assets between accounts. There are specific rules regarding this process depending on which account type is being rolled over from and into, as well as whether or not a minimum distribution (RMD) must be taken. Two options exist: direct and indirect rollover.

Direct Rollover: An administrator of your plan issues a check directly to an IRA custodian, without incurring taxes; however, all money (including 20% withholding ) must be deposited into your IRA within 60 days.

Indirect rollovers are more frequently employed and involve liquidating investments in one account and moving them into your new IRA. You may use this method to consolidate small IRA accounts or convert an employer-sponsored plan into a Roth IRA; but before making this decision it’s essential that you understand all types of IRAs available; note that only one rollover per year is permissible with this IRS regulation in effect.

Time frame

The 60-day time period within which rollovers can occur is defined as the amount of time between when you withdraw your distribution and depositing it into an IRA or another eligible retirement account, in order to prevent taxes and penalties from accruing.

When moving funds out of a retirement plan, you have two rollover options available to you – direct and indirect. Direct rollovers involve your plan administrator sending money directly into an IRA; with indirect rollovers typically coming as checks that must be deposited within 60 days in your new IRA.

If your money is distributed outside of the 60 day deposit window, its entire distribution will be taxed as regular income and subject to an early withdrawal penalty of 10% for those aged under 59 1/2. Furthermore, you must report it as part of your annual taxes, with the IRS setting limits on how many IRA-to-IRA rollovers may take place each year.

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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