Can I Move My Rollover Investment to Another IRA?

IRAs are Individual Retirement Accounts. These accounts defer taxes on your savings inside of the IRA. When you have investments that you want to rollover into an IRA, there are specific rules for how this is accomplished. Make sure you understand these rules prior to moving any assets into your IRA.

Types

• There are certain investments that you may rollover into an IRA. The funds must come from another qualified retirement account. This IRA doesn't need to be a traditional IRA, however. You may rollover investments from an SEP IRA, SIMPLE IRA or a 401k plan for example.

Function

• When you perform a rollover, you notify the brokerage that you want to liquidate the account. Then, you take receipt of the funds. The brokerage will withhold 20 percent of your account balance for tax purposes. You must then deposit these funds into a new IRA within 60 days.

Warning

• If you don't deposit the funds into a new IRA within 60 days, then the IRS treats your rollover as a distribution, and you are subject to income taxes as well as a 10 percent penalty if you are under age 59 1/2. Additionally, you are only allowed one tax-free rollover per 12 months. This means that you cannot transfer the same money you rolled over from your old qualified plan again within 12 months.

Misconceptions

• A common misconception is that you can make as many tax-free rollovers per year as you want. This is false. Instead, you may make unlimited tax-free transfers. A transfer is a transaction where the brokerage handles the money for you. You don't take receipt of the funds and no tax withholding takes place.

Considerations

• Before doing a rollover, consider a transfer. Transfers require less paperwork, and are less risky since you are never in danger of incurring a tax liability from failing to move the money into a new IRA in time.