An IRA provides a dandy means of sheltering some of your hard-earned dollars from taxes, at least for a while, depending on what kind of IRA you set up. All IRA accounts are custodial or trust accounts, but you're not obligated to retain your custodian. If your IRA doesn't perform the way you think it should, you can always transfer your money to a different custodian.
A trustee-to-trustee transfer doesn't involve a distribution of the money in your IRA. Since you never take possession of those funds, there is no taxable event. Your new trustee or custodian can request the transfer for you, or you can instruct your old trustee to make the transfer. There is no waiting period between trustee-to-trustee transfers, so you can do them as often as you wish.
Count the Cost
Just because you have the ability to make frequent trustee-to-trustee transfers, doesn't mean you should. There are typically costs associated with setting up an IRA, and there might be additional costs for transferring your assets to a different trustee. You should also consider how a transfer will affect the investments in your IRA. For example, if you have a certificate of deposit with your current trustee, and you want to move your IRA funds into a mutual fund with a different trustee, you'll have to close out the CD, which could result in an early-withdrawal penalty.
IRA transfers are limited to the same type of IRA. For example, you can transfer your assets from one traditional IRA to a different traditional IRA, or from a Roth IRA to a different Roth IRA. You can also move funds from your traditional IRA into a Roth IRA, but that is a different type of transaction, commonly referred to as a Roth conversion, and you'll have to pay federal income taxes on that money.
Another method of moving money from your old IRA into a different IRA is through a rollover. This involves taking possession of a distribution from your IRA. As long as your reinvest that money back into another IRA within 60 days, you won't get hit with a tax bill for the withdrawal. A rollover is not the same kind of transaction as a trustee-to-trustee transfer, and you must wait 12 months before you can roll over those funds again.
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