When you transfer funds from a tax advantaged retirement plan to another, it is known as a “Rollover.” This applies whether it is from an employer sponsored plan to an IRA or from a traditional IRA to a Roth IRA. A rollover is a transfer from one retirement plan to another in a manner that the funds are not subject to income tax. Rollover rules must be followed strictly in order to avoid taxation.
You can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own.
The rules about roll overs are complex and can change from year to year. For information, speak with your tax advisor or see IRS Publication 590. Click on IRA Rollovers. www.irs.gov/publications/p590a/
How Do I Do A Rollover?
The easiest way is to contact the broker, fund company or administrator you want to invest with. Most companies will provide the forms you need and even call your former employer or financial institution to get your money moved.
If your new company won't make the move for you, contact the current holder of the funds and ask for a check to be made out to your IRA trustee or your administrator. You do not want the check payable to you.
If the check is payable to you, invest it into an IRA or a new company's plan within 60 days. If money was automatically withheld from the check, invest that amount as well.
Edited by: Peg Downey, CFP, NAPFA
Silver Spring, MD