If your IRA isn’t working the way you’d hoped it may be time to transfer the account to another IRA. You’ll want to be careful because if you simply remove the funds without reinvesting correctly into a new fund that qualifies for tax deferral you may open yourself up to IRS premature withdrawal penalties. By understanding a few simple rules you’ll be able to safely transfer your IRA from one trustee to another and invest the funds in a way that better meets your retirement savings goals.
Find a New IRA
Find a new IRA to call home for your retirement money. According to the IRS, nearly any investment may be used inside an IRA except collectibles. If you’re comfortable investing without help, an online brokerage firm may be your best option because fees are generally lower than full-service firms. If you need help choosing investments, use a full-service brokerage. You’ll probably pay more but will receive help from someone who’s passed examinations on helping pick suitable investments.
Ask about withdrawal fees from your current IRA. It’s better to know what the costs of switching will be before making the move official. The IRA provider may assess fees to your account when you leave. The investment inside of your account may also have back-end fees to escape to a new IRA. If you like the investment but want a new IRA trustee, consider an in-kind account transfer. The assets in the IRA will remain in place as the entire account moves to the new IRA custodian.
Complete the Transfer
Complete transfer paperwork with the new IRA trustee. These forms should clearly state that you’re moving money from one IRA to another. You’ll need some basic information about your existing account, such as name and address of the firm and your account number. Keep a copy of this paperwork for your records. and follow up if you haven’t heard anything within a week about your transfer.
Wait for guidance from your existing provider. In some cases, they may need you to intervene but usually, the transfer paperwork will allow them to act as a bulldog on your behalf and secure the funds from your former IRA provider. If you do have to intervene, your new IRA trustee should give you all of the information you need. If not, find the phone number on your statement and ask for an IRA transfer specialist.
Withdraw the funds manually as a last resort if your transfer request isn’t being processed in a timely manner. The IRS allows you to take possession of transfer money for 60 days before they describe it as a withdrawal. Once the money is in your hand, reinvest it quickly to avoid a 10 percent penalty and income taxes on any applicable part of your IRA dollars.
As a former financial advisor to companies and individuals for 16 years, Joe Andrews knows financial planning and marketing from start-ups to personal budgets. He also writes on motor racing, board games and travel. Andrews received his B.A. from Michigan State University in English. He is currently working on a young adult novel.