Maybe your broker is charging high fees that are eating up your IRA earnings. Perhaps your broker’s IRA investment plan isn’t making much money. Even worse, you might have an IRA with high fees and lousy performance. Whatever the reason is, if it’s time to change brokers for your IRA account, go for it. Just be careful to check the rules the IRS has concerning IRA transfers. If you don’t follow the rules and step on Uncle Sam’s toes, the IRS can make you pay income taxes on the transferred money and a stiff penalty tax to boot.
Select a new brokerage firm to handle your IRA account. Ask about fees and the kinds of investments you can make. If you prefer a managed IRA, ask about the IRA investment plans the broker offers. Once you’ve made your choice, open an IRA account so it will be ready to receive the money you transfer from your current IRA account.
Ask your current broker about any transfer fees. If you will be charged a fee, ask your new broker if she will reimburse all or part of the fee. Brokerage firms want IRA account clients because the accounts tend to be stable, so many will pay transfer fees to get your business.
Instruct your current IRA account trustee to make a trustee-to-trustee transfer of the money in your IRA account to the trustee of your new IRA account. The brokerage firm or other financial institution that provides your IRA account is normally the trustee. Moving the funds by a direct transfer ensures you won’t inadvertently break any IRS rules. In addition, a direct transfer can be a "transfer in kind." This means stocks, bonds and other securities in your current account can be transferred, so you don’t have to sell them to move the assets from one account to another.
Roll over the money in your current IRA account if the broker won’t perform a trustee-to-trustee transfer. To do a rollover, instruct your current broker to issue you a check for the funds in your account made payable to your new IRA account. You must deposit the check in your new IRA account within 60 days of withdrawing the money from your old IRA account, as of publication. If you miss this deadline, the IRS will consider the withdrawal an improper distribution and impose income taxes and a penalty tax.
Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.