If you're looking to move your IRA from one financial institution to another without incurring taxes and penalties, there are a few methods you can use. Direct reinvestment is one option, in which the payer transfers a distribution directly to another eligible retirement plan (including an IRA). This method does not require the mandatory 20% withholding, making it a great choice for those who don't need to use the funds. Alternatively, you can opt for the transfer method, which involves setting up separate IRAs for each of your beneficiaries and then transferring the balance of an existing IRA to fund the new accounts.
Avoiding Excessive ContributionsIt's important to note that if you try to make the 60-day reinvestment more than once every 12 months, the amount of the distribution will be taxed, even if you deposit it into an IRA within 60 days.
This limit applies to all of a person's IRAs, including SEP and SIMPLE IRAs, as well as traditional and Roth IRAs. If you don't follow this rule, the other former spouse will be penalized for making an excessive contribution to the IRA. If you're an entrepreneur aged 57 or older and want to transfer part of your IRA from one financial institution to another but use some of the IRA's assets to buy shares, you won't be able to make a transfer during this 1-year period from the IRA to which the distribution was transferred.
Tax-Free TransfersYou 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. It's important to note that naming a trust beneficiary instead of a spouse eliminates the ability for the surviving spouse to transfer the IRA in their name to take advantage of the IRA's ownership rules.
Moving From Traditional IRA To Roth IRAMoving from a traditional IRA to a Roth IRA might make sense if you think you'll be in a higher tax bracket when you start making withdrawals, can pay conversion tax from outside sources, and have a reasonably long time horizon for assets to grow. When you receive a distribution of assets from an employer's retirement plan, such as employer stock, you can sell the shares and transfer the cash income to an IRA.
60-Day Accrual Rule ExemptionsMost of the 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.
However, there are exemptions from this rule that can be found by searching the IRS website (or any Internet search engine) for “exemptions” from the 60-day accrual rule for IRAs. Additionally, once you've calculated your RMD for each traditional IRA account, you can add up the total and deduct it from one or more IRAs in any combination, as long as you withdraw the total amount required.