Where Can I Move My IRA Without Paying Taxes?
If you find a new IRA institution offering lower fees and improved investment options, the hassle of moving assets from your old IRA into it may be worth your while – known as a rollover – which avoids taxes and penalties.
The key to effectively rolling over funds without incurring tax consequences lies in making sure the money never touches your hands – this can be achieved via direct trustee-to-trustee transfers.
Direct trustee-to-trustee transfer
There are various methods available to you for moving your retirement account without incurring tax liabilities. One such approach involves asking your current financial institution to perform a trustee-to-trustee transfer of your balance – this involves moving money directly from one IRA account into another without you touching it directly yourself. Please keep in mind that special regulations must be abided by when undertaking this type of transaction – working with an expert financial professional may help ensure all rules are properly adhered to during this process.
Direct rollover is another alternative; your financial institution sends you a check from your existing IRA, which you then deposit into a new one by following instructions provided on a special form. Direct rollovers do not usually count against annual contribution or income limits and generally do not require reporting to the IRS.
But direct transfers may not always be the ideal solution; they may be difficult and risky to complete, with errors from financial institutions potentially sending money directly into non-IRA or even your taxable accounts. Therefore, it’s essential that you carefully follow instructions and guard your paperwork or online account information in order to successfully make direct transfers work for you.
Direct trustee-to-trustee transfers can also be difficult and prone to error, so you should read any paperwork or online information from your new financial institution carefully to verify that funds were deposited correctly into their respective accounts. If any money landed incorrectly into a taxable account, additional taxes will need to be paid on any differences that were missed out on.
Use of trustee-to-trustee direct transfer is often the safest method of moving retirement accounts; however, you’ll still need to keep a few considerations in mind when moving your account.
First and foremost, make sure your current IRA custodian is prepared to transfer the funds. To do this, check that they have your new account information as well as contact details on file for you and that they provide all required forms for direct trustee-to-trustee transfers if they request it from you.
Be wary of the 60-day rollover rule: if an IRA distribution is made to you and you do not deposit it within 60 days into a different retirement plan or another IRA account, this money will be treated as withdrawal and subject to taxes and possible penalties.
Consider any required minimum distributions (RMD). If you are over age 70 1/2 and looking to move your IRA, make sure that any necessary RMD deadlines are met before making any moves.
No matter why or why not you wish to switch IRA providers – be it lower fees, improved investment options or simply to switch things up – there are ways in which you can do it without incurring taxes. A trustee-to-trustee direct transfer or direct rollover may be the preferred method in most instances.