IRA Rollovers

An IRA rollover refers to a transfer of funds from a retirement amount into either a traditional IRA or a Roth IRA. The rollover occurs either through a direct transfer of funds, of through the use of a check, written by the custodian of the distributing account to the account holder. The account holder then deposits the check into another IRA.

If the IRA rollover is done with a check, there will be a 20% withholding penalty applied before the check is issued. If you want to avoid this penalty, you must take the rollover directly from one custodian to another.

Many IRAs allow one rollover per year on an IRA to IRA transfer. This year runs from the time the distribution is made, rather than being based on the calendar year. For instance, if you start the rollover in May, you will be eligible for a rollover again the following May, rather than in January when the New Year begins.

Typically, IRA rollovers occur when someone changes to a new job and wants to move either 401(k) or 403(b) assets into an IRA. You can use IRA rollovers to transfer funds from a retirement account like the 401(k) into an IRA, or from one IRA to another. If you have a traditional IRA and want to convert to a Roth, you may be eligible to do this provided your adjusted gross income (AGI) is below a certain level within the tax year you're completing the rollover. The allowed AGI amount is based on the tax year during which the rollover takes place.