IRA Chart Rollover Rules

Differences & Rules of Indirect Rollover and Direct Rollover; Rolling over from a traditional IRA or 401(k) plan?

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Use the IRA Chart Rollover Rules with Indirect or Direct IRA Rollovers

Powerpoint slides on a superior retirement planning strategy called Roth IRA on Roids which allows for tax-free distributions, tax-free growth, guaranteed principal and guarateed death benefits.Jonathan currently is the owner of a traditional IRA account. He has thought about rolling that over into a Roth IRA account. In simple terms, a rollover is a method of moving money from one type of retirement plan to another. This can be done without paying taxes or penalties. Jonathan must be aware that there are two ways to complete a rollover: indirectly and directly. In this case, Jonathan is eligible to perform either type. A direct IRA rollover allows you to move money from a current IRA plan or an employee sponsored retirement plan, such as a 401(k), to a new IRA retirement account. This type of rollover is the easiest and will not incur any taxes or penalties. Jonathan is aware that you can invest in both and IRA and 401k at the same time, so he also does that as well. An indirect rollover can be more complicated. With this type of rollover, you take the money from the initial retirement account and then deposit it into a new account. There are some drawbacks with this type of rollover.

Indirect Rollover – 60-day waiting period

If Jonathan opts to perform an indirect rollover, he will have to wait for a period of 60 days after his traditional IRA account is closed and he receives the money. When he performs the rollover, 20% of the total amount will be withheld for taxes. Jonathan will be able to get this amount back when he files his taxes for the year as long as he takes the right steps when doing the rollover. Jonathan must follow the IRA rollover chart rules. When he performs the indirect rollover, he will be required to deposit the entire amount from the previous account into a new IRA, in his case a Roth IRA. To do this and abide by IRA rollover chart rules, Jonathan must find a way to come up with the 20% that was taken for taxes. If the entire rollover is not completed within 60 days, Jonathan will be subject to penalties and possibly additional taxes.

Direct Rollover – No penalties, No waiting period

For most people, including Jonathan, a direct rollover is usually the better option. The entire process is faster because there is no waiting period. Also, when a direct rollover is used, there will be no penalties. It should be reiterated that the only way anyone can perform a direct rollover is if they already have a current IRA plan. For example, if Jonathan did not have the traditional IRA and had a 401(k) instead, he would not be eligible to do the direct rollover. He would have no choice but to utilize an indirect rollover and deal with the IRA rollover chart rules regarding the 60 days and the 20% tax withholding.

Know the guidelines of IRA Rollover Chart Rules to Avoid Penalties

No matter what type of rollover is being performed, it is important to be aware of all the rules and regulations associated with a rollover. Some people just assume that they have some type of retirement plan and they will be able to roll that plan over to a new IRA account. This is not the case at all. Certain types of plans will be allowed to be rolled over easier than others. This is why it is important to be aware of what is allowed when planning a rollover.

Typically, like Jonathan, people will choose to rollover their retirement accounts to a traditional IRA or a Roth IRA. This is allowed as long as eligibility guidelines are met for a Roth IRA. Jonathan should have no problems when rolling over his traditional IRA to the Roth IRA. He has made sure to meet income guidelines for the Roth IRA and he knows that the rollover is allowed. He also knows that this type of rollover will not involve any penalties.

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The IRS rules simple IRA chart is issued by the IRS and explains what rollovers are allowed. View the IRS' IRA Rollover Chart Rules. This IRA rollover chart rule can be used to determine if you are eligible to rollover your current retirement account to a new type of account.

Rocco Beatrice, CPA, MST (Master of Science in Taxation), MBA (Master of Business Administration), BSBA (Management/Accounting), CWPP (Certified Wealth Preservation Planner), CMMB (Certified Mortgage Broker), CAPP (Certified Asset Protection Planner), Managing Director, Estate Street Partners, LLC. Mr. Beatrice is an asset protection, award-winning trust, estate planning and tax expert.

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