Can You Convert a Rollover IRA?

Transferring funds between two IRA accounts is possible by performing either a rollover or conversion, each offering distinct advantages and risks.

Direct rollover involves having the plan trustee of your former employer send money directly to your new IRA provider without withholding income tax, making this the preferred method for most people.

Direct rollovers

Direct rollovers involve moving funds from employer-sponsored retirement accounts such as 401(k), SIMPLE or traditional IRAs directly into another account of similar type, like traditional IRA at another financial institution. This method is most frequently used when rolling over an IRA; when initiated, funds will flow directly from former employer plan directly into new one without tax implications; unlike distribution where money may first come to you before being sent onto new accounts for deposit.

Reasons to transfer retirement assets between accounts include consolidating accounts, finding more suitable locations for investing, or finding financial institutions with lower fees and taxes. But keep in mind that it must take place within 60 days from withdrawing them from your original account in order to avoid penalties and taxes.

Typically, when moving IRA funds between accounts with similar tax status (pre-tax IRA to pre-tax IRA or Roth IRA to Roth IRA), no further taxes or penalties apply – this process is known as rolling over. But if your assets move to one with a different tax status altogether (conversion), more work may need to be completed before getting them moved over successfully.

Converting from a pre-tax to Roth IRA requires paying income tax on any amounts converted, so it is wise to consult a financial professional before undertaking such an endeavor.

Combine Roth conversion and direct rollover strategies to take advantage of favorable tax conditions for both. When making this decision, several considerations need to be made when choosing between transfer or conversion such as investment options, RMDs and timing; consult with a financial professional for the optimal solution for you based on your personal circumstances and goals.

As another point to keep in mind, IRS rules restrict indirect or 60-day rollovers to once every 12-month period for each taxpayer, in addition to the general limit of one IRA rollover each year for all types of IRAs. Janus Henderson offers both rollovers and conversions so you can take full control over your investments no matter your circumstance. For more information on these services contact us now; our specialists are ready and waiting to guide you through this process – we look forward to working with you.


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