April 21, 2014
The Internal Revenue Service (IRS) has made plenty of headlines lately with their new provision regarding traditional IRAs. For 2015, within a twelve month period, investors will only be able to make one rollover to a traditional IRA. Many folks are interpreting this as meaning that they can only change Financial Advisors once per year, however, that isn't the case. Investors are able to make an unlimited number of trustee-to-trustee transfers throughout any twelve month period. To help clear up some of that confusion, let's look at the differences between a rollover and a trustee-to-trustee transfer.
An IRA rollover is the movement of cash and securities between two retirement plans that may be different. An example of this would be movement from a 401k to a traditional IRA. Rollovers may be a taxable event unless two general rules are followed: the rollover must be completed within 60 days of receipt of the funds and only one rollover per individual may be done during any twelve month period regardless of how many IRAs that individual has.
An IRA trustee-to-trustee transfer is the movement of cash and securities between the same types of accounts, such as, movement from one traditional IRA to another traditional IRA, where no distribution is made to you. The money is transferred directly from one custodian to the other on your behalf. IRA transfers can happen as often as you would like and are not a taxable event.
All of the recent headlines regarding this new rule can be easily misunderstood, and if you find yourself transferring funds from a previous employer's plan or changing advisors, it can always be helpful to seek the advice of a financial professional.
Ethan Wade, Financial Advisor
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).