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Author: D14c Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: taking money out of IRA Date: 2/18/2000 8:32 PM
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I am wandering if I take money out of a ira to put it in a new account, say I am taking it out of a bank and want to put it in a E-trade account, can I put that money in with next years 2000 contribution ? I started it in 1998 and have not contributed to it this yet. So is there a way I can change accounts and not miss contributing this year to?
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Author: Chipsboss Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19248 of 76418
Subject: Re: taking money out of IRA Date: 2/18/2000 9:18 PM
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Sure, no problem. You open an IRA with your new IRA custodian and then, in either order, (1) transfer custody of the IRA account from the old custodian to the new custodian, taking no assets into your own hands in the process lest you incur taxes and premature distribution penalties, and (2) make the contribution you want for this year to your new IRA account. No taxes due. You can change IRA custodians as often as you like.

Regards,

Chips, who recommends index funds for retirement accounts, on the rare occasions that someone asks

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Author: Chipsboss Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19249 of 76418
Subject: Re: taking money out of IRA Date: 2/18/2000 9:21 PM
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Oh, I forgot what I learned in another board last night: you can take cash from the first custodian and, as long as you deposit it with the new IRA custodian within 60 days, it is a tax-free transaction.

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Author: waldronr Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19297 of 76418
Subject: Re: taking money out of IRA Date: 2/19/2000 9:31 PM
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...you can take cash from the first custodian and, as long as you deposit it with the new IRA custodian within 60 days, it is a tax-free transaction.

Be careful, the first custodian will withold tax from your cash withdrawal and you'll have to wait until you file your annual taxes to claim it back.
Been there/Done that.

Ron W.

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Author: Chipsboss Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19342 of 76418
Subject: Re: taking money out of IRA Date: 2/20/2000 11:49 PM
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Thanks for the reminder. I used, and recommend, the custodian-to-custodian transfer to avoid the withholding tax.

Isn't it true, based on your experience, that you have to deposit the entire amount withdrawn from the IRA as if no withholding had taken place in order to get the withheld money back? That is, with round numbers, if you withdraw $10,000, the old custodian withholds $2,000 and gives you $8,000, and then you have to come up with another $2,000 from a non-IRA source so that you can deposit $10,000 with the new IRA custodian. Only then are you eligible for an eventual $2,000 refund, which earns no interest while the government holds it for you. If you deposit only $8,000, IRS will treat the withheld $2,000 as a distribution, exacting income taxes and possible penalties for premature withdrawal, not to mention costing you the opportunity to let the $2,000 grow in a tax-sheltered account. Another IRS abuse of the public, actually planned that way by Congress.





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Author: waldronr Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19387 of 76418
Subject: Re: taking money out of IRA Date: 2/22/2000 11:58 AM
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Isn't it true, based on your experience, that you have to deposit the entire amount withdrawn from the IRA as if no withholding had taken place in order to get the withheld money back?

Yes, that is the way that I did it. There may be other ways, but I know of none.

Ron W.

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