Where Can I Move My IRA Without Paying Taxes?
Moving a retirement account between institutions could result in tax implications if you’re under 59 1/2.
There are ways around this. A direct rollover or trustee-to-trustee transfer are popular options available to investors.
Direct trustee-to-trustee transfer
Trustee-to-trustee transfers can be an ideal way to transfer an IRA without incurring taxes. Instead of withdrawing the money directly from your current account, this type of transfer asks that the original IRA institution send it directly to your new IRA provider, so that you may use these funds however you wish. However, there are specific rules you must abide by when moving retirement assets, so working with a financial advisor might help ensure a smooth process.
Moving an IRA may seem straightforward, but in order to avoid paying taxes on its transfer there are certain requirements that you must fulfill in order to avoid paying taxation on its move. Most of these regulations focus on your type of IRA ownership and what asset type it will invest in (for instance collecting antiques). Furthermore, make sure the new IRA meets criteria to hold these assets e.g. real estate or closely held businesses before proceeding with the move.
Rollover is the act of moving money between IRA accounts at different financial institutions in order to avoid having taxes withheld from it. When used, this transfer enables you to move funds from an old employer-sponsored retirement plan (such as 401(k), such as an IRA to one that you control. With rollover, funds from your previous plan will be distributed in the form of a check and must be deposited within 60 days into your new IRA for this process to go smoothly.
Direct trustee-to-trustee transfers offer another means of moving your IRA without incurring taxes, though this method is less popular as it requires the new institution accept all of your investments “in-kind”. Unfortunately, this might not be possible when moving from older company plans into younger IRAs that don’t provide as many investments.
Direct trustee-to-trustee transfers, especially for those with multiple IRAs, may require you to contact both of your old and new IRA providers to initiate the transfer. This may take longer than anticipated and require documentation for both custodians – further complicating matters.
Trustee-to-trustee transfers involve your retirement assets being handled once only when they’re moved between custodians, making the process faster and simpler than a rollover. In certain situations, however, a rollover might be preferable, such as having an account balance too large to meet 60 day deadline or moving from tax-deferred account to Roth IRA.
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