If you’re saving for retirement, you’ve probably heard these terms: IRA transfer or rollover IRA.
They might sound the same to you, but in the financial industry, there’s actually a very important distinction between an IRA transfer and a rollover. So, let’s define both.

Let’s talk about transfers.
Transfers are the most common way to move money from one retirement plan to another, and specifically from one IRA to another.
They’re very easy to do, and you can do unlimited amounts of transfers within any given year.
Let’s say you have a traditional IRA at Fidelity, and that IRA is a pre-taxed IRA. Let’s say you want an establish a pre-tax IRA at Nuview Trust Company.
In order to move money from the Fidelity IRA to the Nuview IRA, all you have to do is an IRA transfer.
You simply fill out the transfer paperwork with the receiving custodian.
So, wherever you’re trying to move the money to, they should have a transfer form.
You fill out that transfer request. It’s then sent to the current custodian, and they move the money via wire or via check.
The important thing about transfers is that they’re not reported to the IRS. And, you have to move them between like accounts. The term “like accounts” refers to how they’re taxed.
Traditional IRAs, SEP IRAs and simple IRAs that have been established for more than two years are all pre-tax accounts.
So, you can transfer money from those accounts to another IRA, or another custodian, without having to report it to the IRS. And you can do it as many times as you want.
But, if you want to move money from a traditional IRA to a Roth IRA – since those are taxed differently – that has to be moved through something called conversions.
We’ll talk about conversions later on.

Now let’s talk about rollovers.
Rollovers are a little bit different. It’s still the process of moving money from one retirement plan to another. But with rollovers, the biggest difference is that they are reported to the IRS.
They’re reported as a distribution from the money leaving the current custodian. And, they’re reported as a rollover contribution to the new custodians’ retirement accounts.

You often are forced to do rollovers when breaking down an old employer plan.
• Let’s say that you’ve worked at a job for X number of years.
• You’re leaving that job and you have a 401k with that company.
Oftentimes they’re going to force you to leave that plan. And since a 401k is not like an IRA – they’re not “like accounts” – you must distribute the money from the 401k and roll it into the IRA.

Two different types of rollovers
Now there are two different types of rollovers. There’s what we call a direct rollover and an indirect rollover.
The differences between the two is a direct rollover is when the sending custodian makes the check payable to the receiving custodian.
For instance, if it’s a Fidelity 401k, and you’re moving it to a Nuview IRA, the rollover check will be made payable to Nuview IRA for the benefit of your retirement account.
Now you can do direct rollovers is many times as you want.
And there’s no timeframe as to when the money has to leave the current custodian, or arrive at the new custodian.

This is different to an indirect rollover.
An indirect rollover is where the sending custodian makes the check payable to you.
When they do this, there’s really no guarantee of what you’re going to do with that money.
If you deposit that money in your own bank account, you have 60 days to roll those funds into another IRA without having to pay taxes or penalties.
So, there is a timeframe as to when the money leaves the plan and needs to be rolled over into a new plan, because the checks made payable to you.

Click the link to continue learning about pros and cons between transfers and rollovers.

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00:00 – Intro
00:30 – Transfers
01:59 – Rollovers
04:07 – Considerations
05:05 – Pros & Cons
06:40 – Conversions…(read more)

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