An official rollover of a stock mutual fund occurs within an Individual Retirement Account (IRA) or another type of qualified retirement plan. With a regular mutual fund account, you can switch your investment to a different fund, but that type of swap or exchange would not be classified as a rollover. In any type of stock fund change, you sell shares of one and buy shares of another.
Mutual Fund IRA Rollover
If your mutual fund account is also an IRA, a rollover involves closing the account, getting a check for the proceeds, opening a new mutual fund IRA account and depositing the money from the old account into the new. You have 60 days to deposit the money once the old IRA is closed. To move the money from one IRA account to another without taking possession of the money, you open the new account and then request a custodian to custodian transfer. The transfer method is simpler than the rollover path for IRA accounts.
Non-IRA Fund Changes
To move your investment from one mutual fund -- not an IRA -- to another, you would sell the shares in your fund account and then use the money to invest in another fund. The sale of fund shares takes two business days to complete, so you would have money to invest in a new account in a few days. Selling mutual fund shares triggers a tax reportable event. You have sold an investment and the IRS requires that a capital gain or loss that must be reported on your next annual tax return.
Fund Family Transfers
If your mutual fund is one of a group of funds in a single fund family, the fund company will make it easy to transfer money from one fund to another in the same family. You can usually make the transfer with a phone call. Be aware that a transfer is a sale of your existing fund and a buy of the new fund for tax reporting purposes. You must still report the gains or loss on the mutual fund money you moved from one fund to another.
When you sell, transfer, or rollover money from a stock mutual fund account to another, the starting fund will send you a Form 1099 at the end of the year to show fund shares were sold. For an IRA rollover, you need to be able to show the money from the sale went into another IRA. For non-IRA fund sales, you get to report a capital gain or loss using the rules for mutual fund sales. The fund company will also provide the cost basis information required on the extra tax forms.
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- What Can I Transfer My Retirement IRA Fund to Without Paying a Penalty?
- The Tax Implications of Selling Mutual Funds & Buying New Mutual Funds
- Tax Implications for Transferring an IRA CD to a Regular CD
- Mutual Funds Process