Where Can I Move My IRA Without Paying Taxes?
An IRA transfer is an efficient way of moving retirement savings between institutions, but be wary: depending on how it is carried out, fees or taxes could apply to your new account.
Some transfer methods require you to deposit their check within 60 days or face tax and penalty charges from the IRS. Here are a few ways that can help:
Direct Transfer
If your IRA funds are held in certificates of deposit (CD), it may be possible to move them without incurring taxes. You will need to contact the financial institution holding your CD account and discuss any necessary steps, such as whether they can arrange for direct transfers between accounts, or whether withdrawal and deposit must take place within 60 days.
Direct rollovers from qualified plans, like Navy Federal IRAs, to qualified accounts do not count as distributions and neither you nor the receiving plan must report them to the IRS. You can make multiple transfers per year into Roth, Traditional, SEP or SIMPLE IRAs; similarly money may also be moved between 401(k), 403(b), 457(b)s and Thrift Savings Plans (TSPs), though you will need to follow instructions from your plan administrator in order to do this type of rollover successfully.
Rollover
Rollovers are one of the easiest ways to transfer funds between retirement accounts. Under this process, your former plan administrator issues a check payable directly to you for deposit in your new IRA account – no IRS taxes apply in this type of transfer! Using rollovers also can allow you to convert pre-tax traditional IRA money into tax-free Roth IRAs (known as backdoor Roths).
If you choose a rollover, you have 60 days to transfer the funds into your new IRA or face a taxable event. Each brokerage and robo-advisor may have its own process for conducting rollovers; carefully follow instructions. Bankrate offers comprehensive brokerage reviews that can help you locate one that best meets your fees, investment offerings and other criteria; once found, begin moving over your funds from your old account.
Transfer to a 401(k)
Some individuals prefer direct rollover into their current employer’s 401(k) plan rather than an IRA for several reasons, including offering lower costs with potentially greater returns, and sidestepping the 10 percent withdrawal penalty usually levied with an IRA.
If you decide to rollover into a 401(k), be sure to follow its specific instructions. In general, deposits should be made within 60 days of receiving distributions from previous employers’ retirement plans in order to avoid taxes being withheld from your funds. Once your money has been deposited in its new account, begin investing it using index funds, which offer low costs while providing good returns – in addition, diversifying your portfolio can help prevent overexposure to one company or industry.
Transfer to a Roth IRA
If you need to move your Roth IRA funds, making a direct transfer may be the easiest and fastest option. Contact your new IRA institution and determine which paperwork is necessary, then submit it directly or online via your investment platform of choice.
Your new IRA will send a check, and it is imperative that it is deposited within 60 days to avoid incurring taxes on both pretax contributions and earnings.
Roth IRA contributions must come from earned income. Salaries, hourly wages, bonuses, commissions and tips qualify as earned income; self-employment income such as rental property rental property income alimony or unemployment compensation do not. Converting traditional accounts into Roth IRAs might make sense if you anticipate being in a higher tax bracket upon retirement; otherwise you might wish to postpone this conversion until then.
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