Most pre-retirement payments you receive from a retirement plan or IRA can be “reinvested” by depositing the payment into another retirement plan or IRA within 60 days. You can also have your financial institution or plan transfer the payment directly to another plan or IRA. Transferring funds from one traditional IRA to another can be achieved by reinvesting an IRA. For the transaction to be considered a reinvestment, the money that is transferred must be withdrawn from the old account and deposited into another account within 60 days.Failure to comply with regulations can be costly, as you can lose your tax-deferred status in reinvestment funds.
If you withdraw funds from an IRA and then deposit them back into your IRA within 60 days, the transaction will not be taxable. You can only make this type of IRA transfer once in a 12-month period. This once-a-year provision does not apply to trustee-to-trustee transfers where money is sent directly from one institution to another.The IRS allows you to transfer money from almost any tax-deferred IRA, such as a traditional IRA, to any other IRA and from any Roth IRA to another Roth IRA. You can also use a rollover to convert money from a tax-deferred IRA to a Roth IRA.
You can make tax-free transfers from your IRAs at any age, but if you can't refinance your required minimum annual distribution (RMD) it would be considered an excess contribution. For example, if you took a distribution of your SIMPLE IRA after a year, you could transfer that money to another SIMPLE IRA, but not to your traditional or Roth IRA.If the former custodian of your IRA account sends you a check, you can deposit the money directly into your Fidelity IRA account. For example, if your traditional IRA has no non-deductible contributions, so all distributions are fully taxable, you must include the entire reinvestment as taxable income. Amounts that must be distributed over a given year under the required minimum distribution rules are not eligible for reinvestment treatment.
Transferring money from one tax-deferred IRA to another, or from one Roth IRA to another, won't create any additional taxes during the year.If you're moving your IRA from one financial institution to another and you don't need to use the funds, you should consider using the transfer method instead of reinvestment. If an entrepreneur, 57 years old, wants to transfer part of her IRA from one financial institution to another, but uses some of the IRA's assets to buy shares. Whether you want better returns, different investment options, lower fees, or better customer service, a reinvestment is one way to take your money out of the old IRA and move it to another. To avoid withholding taxes, you'll want to choose what's called a direct reinvestment from an IRA, in which the check is made payable to your new financial institution as a new trustee or depositary.Next, if you don't already have a Fidelity IRA, you'll need to open one to be able to transfer money from your current IRA to this Fidelity IRA.
This includes both the IRA from which you took the distribution and the IRA where you deposited the money. For example, if you have two IRAs and you transfer money from one to the other, you should wait 12 months before making another reinvestment. Here are the things you should know about how these IRA reinvestments and transfers work and what you can and can't do.If, on the other hand, you transferred money from a tax-deferred IRA to a Roth IRA, you must pay taxes on the reinvestment.