Jeff Dragon
North Shore Retirement Advisors 

(617) 855-9738

#financialadvisor #retirementplanning…(read more)

LEARN MORE ABOUT: IRA Accounts

TRANSFER IRA TO GOLD: Gold IRA Account

TRANSFER IRA TO SILVER: Silver IRA Account

REVEALED: Best Gold Backed IRA

How to Avoid an IRA Rollover Mistake

An Individual retirement account (IRA) is a popular investment option for individuals looking to secure their financial future. It offers tax advantages and a variety of investment options, making it an attractive choice for retirement savings. However, when it comes to rolling over your IRA, there are potential pitfalls you should be aware of to avoid any costly mistakes. In this article, we will discuss some essential tips on how to avoid an IRA rollover mistake.

1. Know the difference between a direct and indirect rollover: It’s crucial to understand the two types of IRA rollovers. A direct rollover involves transferring funds from one IRA custodian to another directly, without the funds passing through your hands. An indirect rollover, on the other hand, involves taking a distribution from your IRA and then redepositing it into another IRA within 60 days. Understanding the distinction is vital as it impacts tax consequences and potential penalties.

2. Adhere to the 60-day rule for indirect rollovers: If you choose an indirect rollover, remember that you have only 60 days to redeposit the funds into another IRA. Failing to meet this deadline may result in the distribution being treated as taxable income, potentially increasing your tax liability. Additionally, if you are under 59 ½ years old, early withdrawal penalties may apply. It is crucial to monitor the timing closely and not exceed the 60-day limit to avoid any negative tax consequences.

3. Consider a trustee-to-trustee transfer: Opting for a direct rollover or trustee-to-trustee transfer is often the simplest and safest method. In this case, the funds are transferred directly between the two custodians, eliminating the risks associated with handling the money yourself. This approach ensures a seamless transition without potential tax implications.

4. Be cautious with “60-day rollover” rule exceptions: While the IRS allows for a one-time rollover within a 12-month period for each IRA, certain exceptions apply. For instance, the rule does not apply to rollovers between Roth IRAs or conversions from traditional IRAs to Roth IRAs. Make sure you are aware of these exceptions and consult with a financial advisor or tax professional before proceeding.

5. Understand the tax consequences: Rollovers from traditional IRAs to Roth IRAs are considered taxable events. The converted amount is subject to income taxes at your current tax rate. Failing to account for these tax liabilities can be a costly mistake. Speak with a tax professional to fully understand the tax implications before initiating any rollover process.

6. Research and compare custodians: When considering a rollover, carefully research and compare different IRA custodians. Look for custodians with low fees, good customer service, and a wide range of investment options. Additionally, inquire about any potential transfer or account closure fees. Understanding the costs involved can help you make an informed decision and avoid costly surprises down the road.

7. Seek professional advice if unsure: If you are uncertain about the rollover process or the potential implications, it is always wise to consult with a financial advisor or tax professional. They can guide you through the process, analyze your specific circumstances, and provide recommendations tailored to your individual needs.

In conclusion, rolling over your IRA can be a beneficial move for your retirement savings, but it requires careful consideration and planning. By understanding the different rollover options, adhering to the IRS regulations, and seeking professional guidance, you can ensure a smooth and successful IRA rollover. Avoiding mistakes can save you from unnecessary taxes, penalties, and potential financial setbacks, enabling your retirement funds to grow efficiently.