You have 60 days from the date you receive an IRA or a retirement plan distribution to transfer it to another plan or IRA. The IRS may waive the 60-day renewal requirement in certain situations if you missed the deadline due to circumstances beyond its control. If you have a traditional 401 (k) or 403 (b), you can transfer your money to a Roth IRA, or even invest in Gold in your IRA. However, this would be considered a conversion to Roth, so you would have to declare the money as income when paying ordinary income taxes on income. As an IRA owner, you can only make one 60-day indirect reinvestment per one-year period.
The downside of this is that some banks may charge for issuing a check to another bank or depositary when you change your IRA. The only difference is that the money from an accumulated IRA can later be transferred to an employer-sponsored retirement plan if the plan allows it. You can make tax-exempt reinvestments with your IRAs at any age, but if you're 72 or older, you can't transfer your required annual minimum distribution (RMD) because it would be considered an excess contribution. An accrued IRA allows you to transfer funds from your previous employer-sponsored retirement plan to an IRA if you leave your job, such as transferring your 401 (k) to an IRA.
If you're simply moving your IRA from one financial institution to another and you don't need to use the funds, you should consider using the transfer method instead of reinvestment. You may also have an early distribution penalty of 10% if you are under 59 and a half years old or a penalty for making an excessive contribution to an IRA, with a tax of 6% per year while your money remains in your IRA. Be sure to check with your plan administrator and IRA depositary about the documentation and operational requirements for processing a direct transfer on your behalf. This means that you can't accept cash distributions from your IRA, buy other assets with the cash, and then transfer those assets to a new (or the same) IRA.
If you have to apply for an RMD every year, be sure to remove the current year's RMD amount from your IRA before implementing the reinvestment. Take a portion of the funds you received from your IRA, buy the shares, and place the remaining cash in a new IRA. When you transfer the distribution of a retirement plan, you generally don't pay taxes on it until you withdraw money from your new plan, although it's best to familiarize yourself with all of the IRA reinvestment tax rules to be safe. Use Ally's self-directed online trading application, select “IRA” and then select the appropriate type of cumulative IRA, or, if your 401 (k) or 403 (b) is a Roth account, select Roth IRA.
Your employer is not required to accept such renewals, so check with your plan administrator before distributing your IRA assets. In the event of an IRA renewal, the original depositary sends you a check for the full amount you are going to withdraw from your IRA. Then you'll call the financial company that has your former employer's retirement plan and transfer your savings to a Vanguard IRA.
