As a refresher, IRA rollovers are simply the transfer of funds from a retirement account such as a 401(k) into an IRA, or an IRA-to-IRA transfer. There are three ways to accomplish this rollover or transfer:
- Direct rollover – The administrator of your account may issue your distribution in the form of a check made payable to your new account. No taxes will be withheld from your transfer amount.
- Trustee-to-trustee transfer – This is an institution-to-institution transfer. No taxes will be withheld from your transfer amount.
- 60-day rollover – If a distribution from an IRA or a retirement plan is paid directly to you (or a check made out to you), you can deposit all or a portion of it in an IRA or a retirement plan within 60 days. Taxes will be withheld, so you’ll have to use other funds to roll over the full amount of the distribution.
It’s the 60-day rollovers that are changing in 2015. Simply put, the IRS will enforce a one-rollover-per-year rule. This means that you can make only one rollover from one IRA to a new IRA in any 12-month period, regardless of the number of IRAs that you own.
The most important exception to this new rule relates to any rollovers made in 2014. Such rollovers will not prevent a 2015 distribution from being rolled over provided the 2015 distribution is from a different IRA than was involved in the 2014 rollover. Also, the following situations are exempt from this new rule:
- Trustee-to-trustee transfers between IRAs are not limited
- Rollovers from traditional to Roth IRAs (“conversions”) are not limited.
It’s still safest to do a direct rollover or a trustee-to-trustee transfer unless you need a “60-day loan” from your IRA. When 60-day rollovers are done, you’ll need to be cautious about early distribution penalties if you’re under age 59 ½ and required minimum distributions if you’re over 70 ½.
The good news is that you don’t have to sort this out on your own. Guidepost Financial Planning is able to help you with this aspect of your financial planning. Please visit our website or give us a call at 970.419.8212 so that we can discuss your financial goals in a no-charge, no-obligation initial meeting.
This article is for informational purposes only. This website does not provide tax or investment advice, nor is it an offer or solicitation of any kind to buy or sell any investment products. Please consult your tax or investment advisor for specific advice.