If you hit a rough patch financially, you might have tapped your individual retirement account to make it through. But, once you got back on your feet, you want to start rebuilding your nest egg as soon as possible. The Internal Revenue doesn't place any time limits on how long you're required to wait before you open a new IRA after taking a withdrawal.
Opening an IRA
Uncle Sam lets you open a new IRA whenever you want because there's no limit on how many accounts you can have. For example, if you have two IRAs already open, you're welcome to open a third. In addition, if you close an old account, the IRS doesn't make you wait for a certain period of time before you're allowed to open a new one.
If you're wanting to roll over the distribution, you must act quickly. You only have 60 days from the time you take the distribution before the withdrawal can't be rolled over anymore. For example, say you take a distribution from an old IRA on May 1, 2013. You must deposit the funds you cashed out into a new IRA by June 29, 2013 to have it count as a rollover. If you miss the deadline, it's treated as a permanent distribution, which means it's hit with income taxes and, because you're under 59 1/2, early withdrawal penalties.
If you've already made your annual contribution and then distributed it, you might be stuck waiting until the next year before you can make another contribution. When you open your new IRA, you can only contribute what's left of your annual contribution limit, which is the smaller of your compensation or the standard limit. As of 2013, the standard contribution is $5,500. For example, say you contributed the maximum in January and then withdrew money in May. If you have extra dough in November of that same year, you can't fund a new IRA because you've already used up your annual contribution for the year -- even if you withdrew your contribution when you took the withdrawal.
Saver's Credit Impact
Your recent withdrawal may affect your eligibility to claim the Saver's Credit, a tax credit that rewards you for making contributions to qualified plans, including IRAs. When you're calculating how much you contributed, you must also include any distributions taken during the two years prior to the year that you're claiming the credit. For example, when calculating your 2013 contributions for the purposes of the Saver's Credit, you must reduce them by the amount you withdrew from your IRA in 2011 and 2012.
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