Moving Your Roth IRA to another Roth IRA

If you have a Roth IRA, you may want to move that money to another Roth IRA elsewhere. There are lots of reasons you might want to do so. For example, maybe the current financial organization that has your Roth IRA has high account fees, and you would like to find another custodian with little or no fees. Or maybe you’ve found a new financial advisor who works with a different custodian than your current one. Whatever the reason, you can move your Roth IRA funds to another custodian at any time. But, there are certain rules that must be followed.

There are two ways to move Roth IRA money to another Roth IRA:
1. 60-day rollover
2. Direct transfer

If you choose the 60-day rollover option to move your Roth IRA money, you first must ask for a distribution payable to you from your current Roth IRA custodian. After you receive the distribution, you have 60 days from the date you receive the funds to redeposit (rollover) them to another Roth IRA. If you miss the 60-day deadline, the funds aren’t rollover eligible and you will lose the benefit of future tax-free compounding of earnings on that money inside a Roth IRA. Also, you a
re limited to one-rollover-per 12 months from each Roth IRA you have.

If you choose the direct transfer option, you ask your current Roth IRA custodian to transfer the funds directly to your Roth IRA at another custodian. In a direct transfer, you don’t have use or control of the money; it’s sent right to your Roth IRA elsewhere. The direct transfer option has the advantage of not being subject to a 60-day limit or a one-rollover-per-year restriction. As a result, the direct transfer option is less problematic than the 60-day rollover option.

If you have assets in your Roth IRA such as securities, those assets can also be moved to another Roth IRA. If you choose the 60-day rollover route, the same assets that are distributed to you must be rolled over.

- By Joe Cicchinelli and Jared Trexler

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Moving Inherited IRA Money? Be Careful

Let's say that someone who is not your spouse recently died and named you as their IRA beneficiary. You now have what the IRS calls an “inherited IRA.” It's also sometimes called a beneficiary IRA. You may want to move that inherited IRA money elsewhere for a variety of reasons. Perhaps you want to invest that money in other assets or securities that aren’t offered by the current financial institution. Or maybe the inherited IRA is at a company that has high fees, or is located too far away from where you live. Lastly, you may have your own investment advisor that is recommending that you transfer the IRA funds elsewhere. Whatever the reason, you have to be really careful when moving inherited IRA money. If it’s not done correctly, the entire IRA will be deemed paid out and taxed.

As a non-spouse beneficiary, the only way you can move the inherited IRA money to another inherited IRA is by way of a direct transfer. In a transfer, or trustee-to-trustee transfer, you don’t have use or control of the money. The IRA check from the custodian is not made payable to you personally, but instead is made payable to the new financial institution, for benefit of the inherited IRA. For example, if you are transferring an inherited IRA to financial institution ABC, the check would be made payable to “Institution ABC, for benefit of John Doe, beneficiary of Sam Smith IRA” or something similar. Also, you can never transfer inherited IRA money to your own IRA; only to another inherited IRA of the same type. For example, if you inherited a Roth IRA, it must be transferred to another inherited Roth IRA, not an inherited Traditional IRA.

As a non-spouse beneficiary, you are not allowed move the funds via a 60-day rollover to an inherited IRA or to an IRA in your own name. If you attempt to roll over the funds within 60-days (i.e., you have control or use for the money), the entire IRA distribution is immediately taxable. Also be wary of an IRA custodian that will only make a check payable to you, the beneficiary. There is no way to fix this problem once you take control of the money (e.g., the IRA check is made payable to you personally). So before you decide to move inherited IRA funds to another financial institution, make sure you do it as a transfer directly to another inherited IRA.

Article Highlights:

• If you want to move inherited IRA money to a different financial institution, you must do it as a transfer; NOT a rollover
• Non-spouse beneficiaries can never more inherited IRA money via a 60-day IRA rollover

- By Joe Cicchinelli and Jared Trexler

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