All of the time we have clients wanting to move funds from other retirement savings accounts to their IRA here at Midland. But most of the time people get confused about whether or not they want to do an IRA rollover or an IRA transfer. So what are the differences between the two?
An IRA transfer is when you want to move funds from one IRA to another IRA. If you wanted to transfer funds into Midland IRA you’ll need to fill out our transfer form. Once that’s filled out we will initiate the movement of funds and have the money deposited into your account at Midland IRA. You have the option to do a full or partial transfer.
An IRA rollover is when you want to move funds from a 401(k) to an IRA. For example, if you have an old 401(k) sitting doing nothing you could do a rollover and roll funds into your IRA. To do a rollover you’d need to fill out a Midland IRA rollover certification form. You would then need to initiate the rollover with your 401(k) plan administrator. There are two different types of rollovers, a direct rollover and an indirect rollover.
A direct rollover is when you move funds from your 401(k) directly into your IRA. You never actually touch the money, therefore avoiding any potential taxing. An indirect rollover is when you take physical receipt of the money from your 401(k) before putting it into an IRA. You have 60 days to deposit the money into the IRA account before suffering tax consequences. If you don’t put the money into your IRA within the 60 day time frame you will be taxed on the money taken out of the 401(k), and depending on your age (Under 59 ½) you may receive an early withdrawal penalty.
Below are examples of a direct rollover versus an indirect rollover versus an IRA transfer.
Transfer: IRA to IRA
Direct Rollover: 401(k) to IRA
Indirect Rollover: 401(k) to Yourself to an IRA
So when you’re ready to move funds from another retirement savings account to an account at Midland IRA, you’ll know the differences between a transfer and a rollover. These are both great options to building up your IRA, especially when you’ve reached your contribution limits for the year!
This article was written by Brenda Whetsell from Midland IRA, headquartered in Fort Myers, FL. For more information contact Midland IRA at 239-333-1032 or visit www.MidlandIRA.com.