When it comes to an IRA rollover VS transfer, what is the real difference? I am glad you asked. It has become commonplace to see the terms used interchangeably and I am not sure that is such a good idea. Here are the details that apply to these transactions.
In a roll-over transaction, a check is made payable directly to you. That requires the liquidation of assets held within the account. In some cases, that could create a loss or “lock-in” a loss, if the values of stocks held within the account have recently fallen.
Recent fluctuations in the stock market have caused a significant number of retirement investors to see the value of their accounts fall by 20% or more over the last year. If things begin to improve, it may take a few years, but hopefully, they will be able to recoup those losses and sell their holdings at a more opportune moment.
For the most part, assets may be transferred from one financial institution to another, without requiring their liquidation. Mutual funds might be an exception, but stocks, bonds, real estate holdings and other assets are transferable. So, when it comes to an IRA rollover VS transfer, transfers have the advantage in this scenario.
Involving the IRS
Rollovers are reported to the IRS. You have 60 days to find another IRS approved custodial company and that company must provide you with the necessary paperwork, which will be attached to other pertinent documents at tax time.
If you do not redeposit the fund in time or the paperwork is handled improperly, the tax-sheltered status of the account could be jeopardized. In some cases, custodians are required to withhold at least 20% of the fund for income taxes. You may be able to get that back, if taxes are filed properly, but why take the chance.
Transfers are not reported to the IRS and do not incur taxes. So, when it comes to the paperwork involved and the possibility of taxes in a IRA rollover VS transfer, the transfers still have the advantage.
You may only take one roll-over per calendar year. There is no limit on transfers. So, if you make the wrong decision about a custodial company, you could re-transfer the fund, but NOT take another roll-over, without incurring taxes. So, once again in this IRA rollover VS transfer picture, the transfers have the advantage.
Something to Consider
Now is the time to consider making some changes in your investment choices, particularly if you have lost money in the stock market or have seen only limited returns. The average account holder earns no more than 8% per year. With the right investment choices, you can earn double that amount, each and every year. In some cases, the return on your investment is guaranteed to be at least twice what your account has earned over the last year.
You would need to learn some more and find a custodian for a self-directed account, but you should be able to grow your account quickly. Hopefully, these were helpful details about an IRA rollover VS transfer and you have something new to think about. You can find out about this and a more simpler TURNKEY solution by clicking on the url at the bottom of this article, and going to my website. There is much more information there.