How to Move Funds From One IRA to Another
Moving funds from one Individual Retirement Account (IRA) to another is a relatively straightforward process that is very similar to transferring regular taxable investment account assets. Generally speaking, you simply open a new account, complete some paperwork and your transfer is underway. As IRA accounts are tax-deferred, however, there are some tax penalties involved if you do not complete your transfer, according to Internal Revenue Service (IRS) guidelines.
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Instructions
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Initiate a trustee-to-trustee transfer. The easiest and most common way to move funds from one IRA to another is to simply do a direct transfer between two IRA custodians. All IRA accounts are required to have custodians, whose duties are to perform various administrative functions regarding the IRA account, such as tax reporting to the IRS. A custodian will also be in charge of the details of any account transfers.
To switch funds from one IRA to another, first you need to open a new account with second IRA custodian, such as a bank or other financial services firm. Inform the new custodian that you intend to make a trustee-to-trustee transfer of your IRA account, and it will provide you with the necessary paperwork. Generally, you will have to provide the specific name on your IRA account, along with the name and address of the IRA custodian. This can most easily be accomplished by providing the new trustee with your most recent account statement. Once you have completed the necessary paperwork, your new IRA trustee will transfer your account for you.
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Rollover your IRA funds. While an electronic trustee-to-trustee transfer is a safer way to ensure that your funds are moved properly, you are also allowed to physically withdraw the funds from your original IRA and deposit them with a new custodian. This type of transfer, known as a rollover, must be completed within 60 days of initiation, and thus carries the risk of tax penalties if you are slow to complete the transfer--specifically, the entire amount of the rollover becomes taxable income if it is not redeposited in time. However, the law does allow you these 60 days to do with the money what you wish, so some investors take advantage of what amounts to a short-term loan before they redeposit their funds. To move funds via a rollover, simply liquidate your account, withdraw the funds, and deposit a check with your new IRA custodian within the 60-day window.
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Follow up on your transfer. Make sure that your full account was transferred over, and that any residual dividends or distributions that may appear in your original account get transferred over as well. Realize that some investment products, particularly proprietary products, such as mutual funds, cannot be transferred out from some firms, and must be liquidated or retained at the original firm.
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Tips & Warnings
Bear in mind that when you transfer your account, you may be charged a transfer fee by the firm losing the account. Ask your new IRA custodian if it will reimburse you for any such transfer fees.
