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Instant Trouble with Your IRA


1-minute video: How to Avoid an IRA Rollover Mistake?


Instant trouble with your IRA

When you reach retirement, you may not need you IRA money, but it may be smart to combine it with other retirement assets. Here we will assume combining the assets is the smart move, but you can create instant stress if you do it incorrectly.

A rollover to an IRA postpones current tax on the funds you transfer and keeps the money growing tax-deferred when properly executed.

Note: for this discussion the term “new IRA” refers to the IRA that is getting the money. It may actually be an IRA you have had for many years, but it seems less confusing to describe it as the new IRA.

Mistakes you need to avoid.

  1. Not meeting the transfer deadlines. When moving money from one IRA to another, you actually have 60 days within which to make the transfer. Some people see the IRA as a source of ready cash, spend some, and then forget to get the whole amount back into the new IRA. Now they have a problem because instead of moving the money without any tax consequences, they now may owe taxes on the whole amount and all in one year. Yikes. This could really bump you into a higher tax bracket and needlessly incur higher taxes. Procrastination is not a good practice when it comes to transferring IRAs.
  2. Failing to transfer into the new IRA what you took from the original IRA or retirement plan at work. From work retirement plans, if you take possession of the proceeds, the firm for whom you worked will deduct federal and perhaps state taxes. This means when it comes time to get your old IRA balance into your new IRA, you will need to add in the amount they withheld. Failure to do so means the shortfall is taxable income and there may be penalties too.
  3. All or none. The law allows partial transfers. So, if you do not want to move all of it for some reason, you have that choice with IRAs. With retirement plans at work they may have special limitation on partial transfers, so you need to check with them on the precise rules.Moving part of the money may facilitate cash flow or tax planning.
  4. Moving the money to the wrong IRA. Transfers can only be made you accounts you own individually. You can not move the money to a spouse’s or child’s account. Again, this transfer is a taxable transfer when it does not go to your own account.
  5. One per year. You can only take possession in the process once in a year. After the first one, the others are taxable distributions.

Let us help you make a safe, tax-free rollover or transfer to an IRA.


This video and text is for information use only and is based on information believed to be true. Much of the information is readily available, but some is drawn from Advisor Products articles. The reader acts on these ideas at their discretion and should consider consulting an accountant, financial advisor, or attorney. No promise is made that an idea or concept is appropriate or would work well for the reader. This is not an offer to provide legal advice or act as an attorney. Contact Steven Erickson JD, MBA, CFP(R), Accredited Wealth Management Advisor, Chartered Retirement Planning Consultant at 573-874-3888 This email address is being protected from spambots. You need JavaScript enabled to view it. , if you have questions or to set an appointment. Serving Clients in Columbia, Jefferson City, and the surrounding counties.


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Tuesday, December 11 2018