When your IRA is under-performing and the fees are too high, you're ready for a change of investment. One way to move the money from one IRA to a better-performing investment is through a rollover -- take a distribution and then redeposit it in another qualified retirement plan within 60 days. But beware, if you don't put it in an eligible account, Uncle Sam treats it as a distribution.
You can move money from your traditional IRA to another traditional IRA, either at the same institution or another institution. For example, if you've decided that in your youth you want more risk and higher potential rewards, you can move your money to a financial institution that shares your philosophy. Alternatively, if you've gotten married and want a more conservative approach, you can swap for a more conservative investment.
If you have an employer plan, like a 401(k) or 403(b), you may be able to roll your money into that plan. The Internal Revenue Service permits you to make such rollovers, but not all plans allow it. For example, if your employer has negotiated a really low commission on trades for your 401(k) plan and you like to trade stocks in your retirement plans, moving the money from an IRA to the 401(k) plan could help you save money on your trades.
The Same IRA
It may sound pointless, but you can roll the money back into the IRA from which you took it out within 60 days. If you took the distribution because you needed to use the money for a short period of time, you can roll the money back where it came from. For example, if you have a chance to get a new car at a great price, but you don't get your big year-end bonus for another month, you could take a distribution, buy the car, and redeposit the money when you get your bonus -- as long as it's within 60 days.
If you find yourself in a lower tax bracket during the year, you can roll money from a traditional IRA to a Roth IRA. Yes, you'll have to pay taxes on the conversion, but you'll avoid paying taxes on your distributions at a potentially higher income tax rate. If you're in a high tax bracket, as tempting as tax-free distributions sound, it's usually not in your best interest to roll over the funds to a Roth IRA.
Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."