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New IRA Guidelines from IRS

New IRA Guidelines from IRS


Starting in 2015, the IRS has new rules for withdrawing money from an IRA with the aim of rolling it into another IRA investment and in the process, taking possession of the funds yourself.

The short version of the new rule is that you can only roll over an account this way once every 365 days.  At some time or another, almost everyone with an IRA wants to change investments, but the new rules have stiff penalties if the change is done incorrectly.

Also the new tax rules are different for IRAs and 401(k) s.  If you are considering taking distributions from any IRA account this year, know the IRS has stated that existing rules apply through Dec. 31. After that, the new rules will apply. 

One important feature of the new rules is that there are still no limits on rolling over IRAs and Roth IRAs from one institution to another.  That process is called a "trustee to trustee transfer,” and you can do that as often as you want.

You can also shift money among different types of retirement accounts – say, from a 401(k) to a Roth IRA – without complications. Of course, before making any moves, have a one-on-one discussion with a financial advisor to make sure you are well within the guidelines. You should also talk through the potential tax implications of shifting funds among accounts. 

However, the new rules do apply to rollovers in which you move the money and hold the check for a time before depositing it in another account.  It is important to note the rule specifies "every 365 days," not once a calendar year. The fail-safe way to avoid penalties when moving IRA fund is to not take the money yourself.  Always direct the money from one institution to another in a "trustee to trustee" transfer.

If the money is not re-deposited in another IRA within 60 days and you are younger than 59½, you will pay a 10 percent penalty plus the funds will likely be subject to income taxes. 

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