Moving Your Money: IRA Transfers & Rollovers

When evaluating your retirement accounts, look at more than your investment—look at where they're invested. If you have numerous accounts at various financial institutions or brokerage firms, it can make managing your savings more difficult. By consolidating your Individual Retirement Accounts (IRAs) into one account, you can reduce any investment fees and maximize your returns.

Transfers and rollovers are the two best methods for consolidating your existing IRA accounts. 

Transfers

An IRA transfer refers to the movement of funds between the same types of accounts with no IRA distribution to you. For example, you could move IRA funds from one Traditional IRA to another Traditional IRA.

Direct Transfer

Generally, a Direct Transfer is the easiest way to move assets from one IRA to a new IRA. The transaction is neither taxable nor reportable to the IRS and is completed by the distributing and receiving financial organizations.

To initiate, ask the receiving financial institution to generate and forward the required forms to the financial institution currently holding your IRA. Upon receipt of your completed forms, the existing institution will send the requested funds to the receiving institution’s IRA account number.

IRA Rollover

An IRA rollover is the movement of funds between any type of retirement account into an IRA and can be done either directly or indirectly. Regardless of the number of IRAs you own, you are only permitted to roll over one distribution from an IRA (Traditional IRA, Roth IRA or SIMPLE) in any 12-month period. A second IRA-to-IRA rollover in a single year could result in a tax consequence of income tax becoming due on the rollover, a 10% early withdrawal penalty and a 6% per year excess contributions tax as long as that rollover remains in the IRA.

Direct Rollover Option

Consider a Direct Rollover if you leave a job in which you participated in an Employer Pension or Profit-Sharing Program. You can rollover a 401(k) or Thrift Savings Plan (TSP) if you want to move your funds into a Navy Federal IRA.

Speak to your company's Plan Administrator to complete the necessary forms. Once completed, the administrator will distribute the assets to your IRA. This transaction is reportable as a distribution and will be reported as a rollover.

By rolling over your retirement savings from an employer-sponsored retirement plan directly to an IRA, you'll avoid mandatory 20% income tax withholding and any IRS early distribution penalty, although investment surrender fees may still apply. Rollovers to IRAs also allow you to retain the tax-sheltered status of your retirement savings while maintaining complete control over your investment selection and account access.

Indirect Rollover Option

An Indirect Rollover is a tax-free distribution of all or part of your IRA assets. Since you take possession of the IRA assets, the movement is reportable to the IRS through your Social Security number.

You may move your funds from one retirement plan to another or from one financial institution to another. You may make only one rollover of the same assets to another financial institution during a 12-month period. You have 60 days from the date you receive the distribution to make the rollover yourself or you will have to pay income tax on the amount, plus a penalty.

Transfer or roll over your funds from a qualifying plan to one of our IRA options. We're here to help you decide which is best for you and your personal finance needs.