Understanding the difference between an IRA to IRA transfer (recommended method) and an IRA to IRA rollover

When you are ready to move funds to your Self Directed IRA, you might have a few options. IRA Club is here to assist you with this process. Keep in mind the rules for IRA rollovers changed effective January 1, 2015. 

 

IRA to IRA Transfer

An IRA to IRA transfer is the recommended method. Funds flow from your account at the former IRA trustee to your account at the new IRA trustee. Most importantly, the funds never touch you, the IRA owner.

Q. How often can an IRA be transferred?

A. Unlimited

Q. Are there any taxes and penalties?

A. An IRA to IRA transfer is not a taxable event. As a result, there are no income tax penalties. IRA Club will assist you with the transfer.

IRA to IRA Rollover

Funds flow from the former IRA trustee to you, the owner of the IRA. The owner of the IRA deposits the funds in their personal checking account. After that, the owner of the IRA writes a check to the new IRA trustee.

Q. How often can IRA funds be rolled-over?

A. IRA rollovers can be done once in a 12-month period (not calendar year).

Q. Is each IRA account counted separately?

A. Each IRA account is not counted separately. However, the 12-month restriction applies to the individual. If you have several accounts, you are permitted only one rollover per 12 months, not one rollover per account.

Q. What happens if I make a second rollover in 12 months?

A. If you make a second rollover in 12 months, it will be treated as an IRA distribution and will be considered a taxable event.

 

In Conclusion

As you can see, both methods will fund the new IRA. However, to retain the greatest flexibility consider moving your funds by an IRA transfer (i.e. let IRA Club do it for you). The transfer is easier, quicker, and avoids a taxable event.

Reference: Internal Revenue Code Section 408(d)(3)(B)

 

For information about the Self Directed IRA or Solo 401k, call IRA Club at 312-795-0988

IRA Club offers no investments, products, or planning services. Therefore, please consult your attorney, tax professional, financial planner, and any other qualified person before making any investments.