Transfers and Rollovers

How can I move my IRA assets from one financial organization to another?

Moving your IRA assets from one financial organization to another can be done as a transfer or a rollover. In a transfer, your IRA assets are sent directly from your current financial organization to your new financial organization (i.e., the IRA assets are not distributed to you). In a rollover, your IRA assets are distributed to you and you must subsequently redeposit them into an IRA within 60 days to avoid taxation. There are restrictions on how frequently you may roll over your IRA assets, but there are no restrictions on how often you can transfer your IRA assets.

What is the primary difference between a transfer and a rollover?

In the case of a transfer, an individual’s IRA assets generally are transferred directly from one financial organization to another. Because IRA assets are not paid to you, transfers are not reported to the IRS. With a rollover, on the other hand, IRA assets generally are paid to you and then you must redeposit the assets into an IRA within 60 days to avoid taxation. Because assets are distributed to you, financial organizations must report rollovers to the IRS and you must report the rollover to the IRS on your federal income tax return, even though a completed rollover is a nontaxable event.

How long do I have to complete a rollover contribution after withdrawing the money from my IRA?

You generally have 60 days beginning with the day after you receive an IRA distribution to roll it over and avoid taxation.

Am I limited to the number of times I may roll over my IRA assets?

Yes. You are allowed to roll over one distribution from an IRA (Traditional, Roth, or SIMPLE) in a 12-month period, regardless of the number of IRAs you own. And you may not roll over the same assets more often than that. The 12-month period begins on the date you distribute the assets, not on the date you roll it over.

May I transfer or roll over assets from my Traditional IRA to a Roth IRA?

While you are not allowed to “transfer” or “roll over” assets from a Traditional IRA to a Roth IRA, you may “convert” all or part of your Traditional IRA to a Roth IRA. When converting from a Traditional IRA to a Roth IRA, you generally must include the amount distributed from your Traditional IRA in your taxable income for the year of the distribution, less any amount that represents after tax assets (e.g., nondeductible contributions). Conversions can be done directly (financial organization-to-financial organization) or indirectly (distributed to you, and deposited to a Roth IRA within 60 days).

Individuals who performed conversions in 2010 were allowed to divide the tax liability equally over 2011 and 2012. This special two-year taxation rule only applies to 2010 conversions.