How to avoid IRA rollover charges

Did you know that the Internal Revenue Service allows you only one IRA to IRA rollover per 12 month period? This includes rollovers from one IRA account to another IRA account, from an employer sponsored retirement plan into an IRA account and from one employer’s plan into another employer’s plan. Employer sponsored plans might include funds invested into pension, profit-sharing, stock bonus, and annuities. Loss of job is not the only reason to rollover your funds; you might be simply dissatisfied with the way your funds are currently invested.

Here is an example of a tax-exempt rollover: All or a portion of the funds from your employer’s qualified plans or funds from your stock investment firm are issued as a check and sent to you to be deposited into your personal bank account. This money must be invested into an IRA qualified plan within 60 days to avoid income taxes and additional IRA withdrawal penalties. You may choose to use the funds during this 60 day period; you also have time to shop around for a new investment option or firm. In addition to this, this allows you to wait until your new employer offers you a qualified plan you are interested in.

However, if you are not satisfied with your new investment firm or for some other reason need to close your new qualified tax-deferred account within 12 months, your funds are subject to income tax and early withdrawal penalties.

To avoid these fees, you should consider plan to plan transfers, such as annuity to annuity, annuity to IRA and stock investment firm to annuity transfers. You don’t need to wait another 12 months to transfer your funds; there is no IRS limit for plan to plan transfers as long as you are within qualified limits.

Read more about tax-free 1035 Exchange

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