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We have decided to take lump sum from 2 of DH's pensions and roll them over to a traditional IRA. He's talking about getting the check and depositing it himself, but I am remembering something in the back of my head about that only being possible once a year these days, and there are two different pensions from two different companies he will do this for. He already has the IRA set up, and I am encouraging him to do a direct rollover. Is there any reason why he would have to do so? Am I remembering incorrectly? Would not be surprising as this is just a shadow of a memory.

TIA,

IP
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We have decided to take lump sum from 2 of DH's pensions and roll them over to a traditional IRA. He's talking about getting the check and depositing it himself, but I am remembering something in the back of my head about that only being possible once a year these days, and there are two different pensions from two different companies he will do this for. He already has the IRA set up, and I am encouraging him to do a direct rollover. Is there any reason why he would have to do so? Am I remembering incorrectly? Would not be surprising as this is just a shadow of a memory.

Your memory is correct. Only a single non-trustee-to-trustee rollover is allowed in any 12 month period. So he could only do that for one of the pensions.

Additionally, if the pension plan writes out a check to him, they will likely be required to withhold at least 20% in Federal taxes, and your state may also require withholding. If he wants to roll the entire amount over, he will have to come up with the cash to make up for that withholding. With a trustee-to-trustee rollover, withholding is not required.

All of that said, please keep in mind if the check that he gets is made out to "DH's IRA FBO DH" (where FBO means For Benefit Of), it is still considered a trustee-to-trustee rollover, since DH can't actually take possession of the money by cashing the check - only the IRA administrator can cash it. So, he can still get a check - it just has to be made out correctly. He would then either have to take it to a branch office for the IRA administrator or send it into the IRA administrator.

AJ
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He should use a direct trustee-to-trustee transfer. There is a rule that allows only one rollover per 12 months. Whether that rule will be enforced this year is unclear (to me; it might have been in one of the COVID-19 laws just enacted). So better to play it safe than discover later that one of the rollovers wasn't allowed and now becomes fully taxable.

Ira
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Your memory is correct. Only a single non-trustee-to-trustee rollover is allowed in any 12 month period. So he could only do that for one of the pensions.

Thanks AJ. Nice to know I am not totally losing it. He looked into it further and it's very easy to do directly. One is already on it's way.

IP
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Your memory is correct. Only a single non-trustee-to-trustee rollover is allowed in any 12 month period. So he could only do that for one of the pensions.

Additionally, if the pension plan writes out a check to him, they will likely be required to withhold at least 20% in Federal taxes, and your state may also require withholding. If he wants to roll the entire amount over, he will have to come up with the cash to make up for that withholding. With a trustee-to-trustee rollover, withholding is not required.



I re-read one of my Ed Slott books on IRAs to see what stuff I highlighted in 2018 became obsolete last December with the SECURE Act. Let me confirm that aj is correct on the one non-trustee-to-trustee rollover per year rule. Also, it sounded like doing a non-trustee-to-trustee rollover from IRA to IRA will sometimes result in 20% being withheld for federal income taxes. But, with a non-trustee-to-trustee rollover from 401k to IRA, there will *always* be 20% withheld. So, you have to come up with that 20% to put into the new IRA or get dinged with a withdrawal, triggering taxes and possibly penalties.

Why risk misplacing the paperwork, or getting sick, or whatever, and missing the 60 day window? Do the trustee-to-trustee transfer.
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. Let me confirm that aj is correct on the one non-trustee-to-trustee rollover per year rule.

One rollover per 12 months not calendar year.

A trustee-to-trustee move is not considered a rollover.
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