UnThreaded | Threaded | Whole Thread (11) | Ignore Thread Prev Thread | Next Thread
Author: david529 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76397  
Subject: Transferring an IRA Date: 1/2/2004 11:05 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
I have a traditional IRA with a brokerage house. I would like to transfer these funds to another brokerage house. One recommendation was to request a check from the old broker.

It was suggested that I could get a check from the old broker, deposit the funds into my personal bank account, then write a check to the new broker for the exact amount. Provided that I accomplish this pass-through within 60 days there would be no tax issues.

Does this sound right?

David
Print the post Back To Top
Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 38336 of 76397
Subject: Re: Transferring an IRA Date: 1/2/2004 11:16 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
It was suggested that I could get a check from the old broker, deposit the funds into my personal bank account, then write a check to the new broker for the exact amount. Provided that I accomplish this pass-through within 60 days there would be no tax issues.

My suggestion is always to not touch the IRA money - have it go directly from one broker to the other. If something happens within the 60 days and you don't get to it, you're just screwed. I know it's hard to imagine but a car accident on day 59 would do it.

rad


Print the post Back To Top
Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 38337 of 76397
Subject: Re: Transferring an IRA Date: 1/2/2004 11:33 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Does this sound right?

This is technically correct. Be aware, however, that the 60 days is pretty much written in stone. Until 2003, the IRS issued no (as in none, zero, nada, zilch) exceptions for any reason. They have recently issued some new guidance, such that if your third son is injured by falling debris from a Chinese space launch on the second Thursday in March, then you have a reasonable excuse for missing the 60 days. ;-) (OK - one exception they are now allowing is if the brokerage screws up and has your money but doesn't open the IRA account - but I figure the probability of the two events are fairly close.)

IMHO, its much better to have the old broker send the money directly to the new broker to accomplish this rollover. There are no time restrictions - so if one of them screws up you are not penalized. You can do this as often as you like. If you get the money, you can only do this once every 12 months. Further, there is no reason to sell all of your securities, move cash, then repurchase them in the new IRA. Many can accomplish the rollover by transferring the securities directly to your new broker.

Just a note - some brokers, when doing a trustee-to-trustee rollover (which is what I recommend above) actually send a check to you. But the check will be made out to your new broker. That is OK and is still a trustee-to-trustee rollover. Just make sure the check gets to the new IRA custodian ASAP.

--Peter

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post Back To Top
Author: cliff666 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 38338 of 76397
Subject: Re: Transferring an IRA Date: 1/2/2004 11:41 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
It was suggested that I could get a check from the old broker, deposit the funds into my personal bank account, then write a check to the new broker for the exact amount. Provided that I accomplish this pass-through within 60 days there would be no tax issues.

Without looking it up, I advise againist getting a check in your name AT ALL! I believe the old trustee is required to with-hold 20% as "tax" Also, if you are under 59, there is the 10% penalty bugaboo. The gummit doesn't trust you to put it back into another IRA.

By letting the money go from trustee to trustee, you avoid any questions.

cliff

Print the post Back To Top
Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 38339 of 76397
Subject: Re: Transferring an IRA Date: 1/2/2004 11:48 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
That 20% withholding is when you cash out a 401k and make the mistake of having the check sent to you.
However, doing the trustee-to-trustee transfer is neater. Tell your new broker you want to move the account previously at ABC Brokerage, and send them a copy of your most recent statement. The new broker will have forms for you to sign. They can go back with the statement from the old broker. They do the rest and you have nothing to worry about.
Taking a check to yourself is more a way to get a short term loan to yourself for some purpose; again if you mess up and don't get the money back in some IRA within the 60 day limit you are in a pile of doo-doo.
Best wishes, Chris

Print the post Back To Top
Author: cliff666 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 38340 of 76397
Subject: Re: Transferring an IRA Date: 1/2/2004 11:52 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
That 20% withholding is when you cash out a 401k and make the mistake of having the check sent to you.

Thanks, crosenfield. I plead senior moment. I have actually withdrawn from an IRA and put the same money back in 59 days or less. Yes, it was a short-term loan from me to me.

cliff
... embarrassed.

Print the post Back To Top
Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 38341 of 76397
Subject: Re: Transferring an IRA Date: 1/2/2004 12:16 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Without looking it up, I advise againist getting a check in your name AT ALL! I believe the old trustee is required to with-hold 20% as "tax" Also, if you are under 59, there is the 10% penalty bugaboo. The gummit doesn't trust you to put it back into another IRA.

By letting the money go from trustee to trustee, you avoid any questions.


Yes.


Print the post Back To Top
Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 38345 of 76397
Subject: Re: Transferring an IRA Date: 1/2/2004 6:07 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
...within 60 days ....

Don't do it this way! There are lots of things that can go wrong, the worst of which would be if you should die before the transfer is complete. In addition to being dead this could cost your estate big bucks and that your ghost would probably prefer not to let the government and lawyers have.

Call the new broker and let them do it for you directly. If you are transferring shares in stock you do not need to sell them and repurchase them in the new account, they will transfer the shares for you but there may be a transfer fee of something like $25 to $50.


Greg


Print the post Back To Top
Author: bfoates Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 38351 of 76397
Subject: Re: Transferring an IRA Date: 1/3/2004 3:04 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
David,

I did a "check to me then my check to another broker" type transfer last week. Not sure why everyone thinks that things will go wrong. I saved about $60 by not having to pay for a "partial transfer of funds" (Schwab).

No withholding was required for taxes or penalty.

Bruce

Print the post Back To Top
Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 38354 of 76397
Subject: Re: Transferring an IRA Date: 1/3/2004 1:20 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
I did a "check to me then my check to another broker" type transfer last week. Not sure why everyone thinks that things will go wrong.

It's not that things WILL go wrong. On the contrary, they very often go just fine. But IF things go wrong, they can go VERY wrong.

Basically, the risk is proprotional to the amount of the rollover. For an IRA with a couple thousand dollars, the risks aren't that great. If you were doing a rollover with a few HUNDRED thousand, then I wouldn't recommend taking the risk.

I saved about $60 by not having to pay for a "partial transfer of funds" (Schwab).

And how much did you spend in commissions to liquidate all of your positions? And acquire new positions (in the same securities?) in the new account.

That's another advantage of a direct transfer. The securities themselves can be moved without having to convert everything to cash.

I guess it's just a bit of professional caution. You can almost never go wrong by doing a trustee-to-trustee transfer. When the IRA owner gets the cash is when things can turn messy.

--Peter

Print the post Back To Top
Author: bfoates Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 38364 of 76397
Subject: Re: Transferring an IRA Date: 1/4/2004 10:41 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1

Basically, the risk is proprotional to the amount of the rollover. For an IRA with a couple thousand dollars, the risks aren't that great. If you were doing a rollover with a few HUNDRED thousand, then I wouldn't recommend taking the risk.

You're probably right about this. My transfer was for about $10K.

And how much did you spend in commissions to liquidate all of your positions? And acquire new positions (in the same securities?) in the new account.

In my case, not much. I sold a mutual fund at zero cost, and transferred to BrownCo where I can make trades for $5. Actually though, I made the transfer this way so I could then convert the cash to my ROTH IRA before the end of the year. It took about 7 days total instead of several weeks for a direct transfer.

You can almost never go wrong by doing a trustee-to-trustee transfer. When the IRA owner gets the cash is when things can turn messy.

I agree, but there may be times when it is the best way to go.

Bruce




Print the post Back To Top
UnThreaded | Threaded | Whole Thread (11) | Ignore Thread Prev Thread | Next Thread
Advertisement