Learn how Roth IRA transfers work. Avoid taxes and penalties by following key rules. Discover how Vanguard can help you safely transfer your Roth IRA.
Traditional and Roth IRA transfers: How to move your account safely
What is an IRA transfer?
An IRA transfer is the direct movement of money from one IRA into another IRA of the same type. You might consider an IRA transfer if you want to consolidate multiple IRAs or switch to an investment provider that offers lower fees and better investment options.
Thinking about transferring your accounts?
IRA transfer vs. rollover: What's the difference?
An IRA transfer involves moving money from one IRA directly to another. This is sometimes called a trustee-to-trustee transfer.
A rollover typically involves moving money from one type of account to another, for example from a 401(k) to an IRA.
- A direct rollover occurs when money from a retirement account is sent directly from the old institution to the new institution without passing through your hands.
- An indirect rollover occurs when you receive a distribution from your retirement account and then deposit the money into a new retirement account on your own. This must be completed within 60 days to avoid taxes and penalties (known as the 60-day rule).
A conversion is the process of moving money from a traditional IRA or 401(k) to a Roth IRA or 401(k), which typically involves paying income tax on the amount converted but allows for tax-free withdrawals in the future if certain conditions are met.1
Each method has its own set of rules and potential tax consequences, so it's important to understand the differences between an IRA transfer and a rollover before making any moves with your retirement funds.
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What are the rules for IRA transfers?
When completing a transfer, here are some rules and considerations to keep in mind:
- Your money shouldn't be withdrawn. Whether your transfer is internal or to another financial institution, your investment provider(s) should facilitate this asset movement for you, directly into the receiving IRA. You shouldn't receive a distribution as part of this process.
- No 60-day rule. Since IRA transfers move your money directly to the receiving institution, you don't need to worry about any deadlines like you would with an indirect rollover.
- No tax withholding or penalties. As long as you're transferring money from an IRA into the same type of IRA, no tax withholding or early withdrawal penalties will apply. But keep in mind that converting a traditional IRA to a Roth is a taxable event.
- Unlimited transfers. There are no annual or lifetime limits on IRA transfers.
- RMDs aren't affected. Consolidating your IRAs doesn't affect how much you'll need to take out for required minimum distributions (RMDs).
If you're not sure if an IRA transfer is right for you, consult with a financial advisor or tax professional about your situation.
Why you might transfer a traditional or Roth IRA
When considering a transfer of your Roth or traditional IRA, these potential benefits can be key factors in your decision and may influence which financial institution you choose to receive your assets:
- Lower fees. High maintenance fees, transaction fees, or other charges can erode the value of your IRA over time. By transferring to a provider with lower fees, you can help ensure that more of your money stays invested, maximizing its potential growth.
- Better investment options. Some institutions offer a broader range of investment options, including lower-cost funds and more diverse portfolios. This can help you meet your financial goals.
- Consolidation of accounts. Managing your accounts at one company can make it easier to keep track of your investments.
How to transfer a traditional or Roth IRA to another broker
Here's a checklist to guide you through the IRA transfer process:
Step 1: Identify which accounts you'd like to transfer
Identify the IRA you want to transfer, and make sure you're transferring to an IRA of the same type.
Step 2: Open a new account or identify an existing account
If you haven't already, research various investment providers to compare their fee structures, investment options, and account features. Once you've chosen your preferred provider, you'll need to either open a new IRA or select an existing account to receive your assets. If you've chosen Vanguard and don't yet have an account, you can open one during the online transfer process.
Step 3: Gather your information
Many IRA transfers can be completed electronically between firms, but you'll need key details from both accounts, such as your account numbers and desired transfer amounts.
Step 4: Initiate the transfer
When you're ready, the company you're transferring your assets to will initiate the transfer on your behalf.
Start a transfer or rollover to Vanguard today.
Frequently asked questions about traditional or Roth IRA transfers
Yes, you can transfer a portion of your Roth or traditional IRA. This is known as a partial transfer. Always check with your financial advisor or broker-dealer to confirm transfer steps and any potential restrictions or requirements.
There are no limits for direct Roth or traditional IRA transfers.
Digital transfers can take about 5 to 7 days. The time needed to complete transfers initiated with paperwork may vary.
Yes, you can transfer one IRA to another of the same type without penalty. Here's how:
IRA transfer: You instruct your new IRA custodian to transfer the money from your current custodian, either online, by phone, or through a financial advisor or broker-dealer. Your new IRA custodian will then initiate the transfer for you. Since the assets are transferred directly from one IRA to another of the same type, there are no taxes or penalties involved.
Indirect rollover: An indirect rollover involves withdrawing the money from your current IRA or other retirement account and then depositing it into a new IRA or other retirement account within 60 days. If you complete the rollover within this timeframe, there are no taxes or penalties. You're limited to one rollover from an IRA to another within a 12-month period. If you choose an indirect rollover, make sure to keep accurate records and complete the process within the 60-day limit.
The 60-day window applies only to rollovers—not to transfers. If you initiate a rollover and miss the window, the money you withdrew will generally be considered a distribution, which can trigger tax consequences and potential penalties. Any distributions from a traditional IRA, or earnings on Roth contributions, can be subject to taxes and possibly a 10% early withdrawal penalty if you’re under 59½ years old.1 However, if you qualify for a waiver, you can complete a rollover beyond the 60-day period.
To avoid these issues, you might want to consider a direct trustee-to-trustee transfer instead, which doesn't have a time limit. If you do miss the deadline, consult with a tax professional to explore any possible remedies or exceptions that might apply to your situation.
Yes, you can move money from an employer-sponsored 401(k) plan to an IRA. This type of transaction is called a rollover, not a transfer.
If you move pre-tax assets into a Roth IRA, this is classified as a conversion. The converted amount is considered taxable income, and you may owe income tax on any pre-tax amount converted. Even if you're rolling over Roth 401(k) assets, you may also have pre-tax money from an employer contribution. Moving that money to a Roth IRA would also be considered a conversion, and you may need to pay taxes on that amount.1
You can opt for a direct 401(k) rollover where the 401(k) plan administrator sends the assets directly to the IRA custodian. If you receive the money yourself, through an indirect rollover, you must deposit the full amount into a Roth IRA within 60 days and be prepared to cover any withheld taxes out of pocket. Consulting a financial advisor or tax professional can help you navigate the process and minimize tax impacts.