If you want to move your IRA, you have two options. The first is a rollover and the second is a transfer. The difference between the two is whether you take receipt of the money in the IRA. In a rollover, you cash out your IRA and have up to 60 days to put it into a new one or you pay penalties and taxes. In a transfer, the money goes directly from the present custodian to the new custodian, the company that holds the IRA. The transfer requires less hassle and paperwork at tax time.
Investigate your options for a new company. You can do as many transfers throughout the year as you want, compared to only one time every 12 months for a rollover, but it does not mean you should transfer your account frequently. Many companies have a setup fee, annual fee and/or a termination fee. If they have an annual fee and you park your money, even if it's for one day, you receive the charge. That's because it takes man-hours and paperwork to set up your new account.
Combine your assets into one account if you can. If you do this, you'll not only save on annual fees, you'll make your IRA easier to track because you'll have just one statement. When you transfer all your assets into a company that already holds an IRA, you potentially save any new set up fees. If your money is in mutual funds, using only one fund family gives you the potential of breakpoints. Breakpoints mean you pay lower fees because of the higher amount you have with the fund family.
Consider a Transfer in Kind
Check the potential to transfer your assets in kind. Transferring in kind means you don't sell any of the IRA assets but simply lift them from one IRA and place them in the next. If your new IRA is in a brokerage company, you can do this with almost all IRA assets except bank products. However, if you're moving your IRA from a brokerage to a mutual fund company, insurance company or bank, you may have to sell all the assets first and simply move the cash. Once it arrives with the new custodians, you then invest it in the products that company has available.
Open a New Account
Fill out the paperwork to open a new account at the new company you've selected. In many cases, the new financial institution allows you to do the transfer paperwork and other paperwork necessary to open the account at the same time. Make certain you have the latest statement for your old IRA. The new custodian needs a copy to ensure a proper transfer. Sign all paperwork, including the custodian-to-custodian transfer papers.
Complete the Transfer
Read the transfer paperwork thoroughly before you submit it. You need to make sure all the information on the transferring IRA is correct. You may be responsible for selling assets before you submit the paperwork if you want the money to transfer as cash instead of assets. This can cause delay since the transferring custodian doesn't make a hardy attempt at letting you know but simply sits on your request. If you're transferring a bank CD or other investment with a maturity date, check the box to transfer the funds at maturity or you'll receive an early withdrawal penalty because they'll transfer it immediately.
Monitor the new account for the arrival of your assets. If you've made the transfer in cash, you want to invest it as soon as possible to maximize the return. If you wait for a statement, both the receiving and surrendering custodian may not send them out until the end of the quarter. This could cost you if your money is in a low-paying money market fund at a brokerage, bank or mutual fund company.