Where Can I Move My IRA Without Paying Taxes?
When moving an IRA, generally speaking, the most tax-efficient method is via direct trustee-to-trustee transfer. You do this by contacting your new IRA institution and providing them with paperwork meeting their specific requirements.
This method can also be used when rolling over an old 401(k).
Direct trustee-to-trustee transfer
One of the easiest and least costly ways to transfer an IRA without incurring taxes is a direct trustee-to-trustee transfer, in which your new financial institution sends funds directly from their account into your old custodian’s. No funds need to pass through your hands – making this method particularly advantageous as they don’t count against IRS’s one IRA rollover rule, which applies equally to both traditional and Roth IRAs.
However, not all financial institutions provide this service; therefore it is vital that you conduct thorough research on potential IRA providers before finding your partner and initiating the transfer. Once this has taken place, simply request direct trustee-to-trustee rollover from your old financial institution to the new IRA provider.
What are the differences between direct and indirect rollovers?
Although IRA transfers and rollovers may appear similar, there are distinct distinctions. Transferring an IRA between similar accounts (like two IRAs or an employer-sponsored 401(k) accounts) cannot take place while indirect rollovers involve moving retirement assets between different account types such as moving traditional IRA assets to Roth IRA accounts.
Direct and indirect rollovers can make an important difference when it comes to taxes due when moving assets around. A direct rollover occurs when your original custodian or trustee sends distribution checks directly to your new IRA account owner instead of you taking physical possession of them – it is therefore the most tax-efficient way of rolling over an IRA.
An indirect rollover requires receiving a distribution check from your former employer’s plan and depositing it within 60 days to an IRA or retirement account, otherwise incurring taxable distribution and potential penalties. If completing an indirect rollover to a Roth IRA instead, however, this tax consequence can be avoided by providing evidence that all funds were redeposited within that timeframe – submit a statement with your IRS return certifying this fact!
How can I begin the process of moving my IRA?
Begin the move by gathering all relevant account details such as passwords, account numbers and statements from your current custodian; gathering details about the new financial institution as well; then contact them and request they initiate a trustee-to-trustee transfer between your existing custodian and themselves.
To successfully transfer an IRA between trustees, both financial institutions must use identical forms. In some instances, this may require you to fill out the same form you used when transferring a 401(k). It is wise to work with an expert financial professional so your paperwork is in order; they will help guide your through any complex transfer rules and regulations applicable to your situation.