Can You Move an IRA From One Bank to Another?

Individual Retirement Arrangements (IRAs) are tax-advantaged savings tools for retirement. Many individuals find it beneficial to move their IRA between financial institutions to consolidate savings or align with financial goals. This process involves specific methods and considerations to maintain the tax-advantaged status.

Understanding IRA Transfer Methods

Moving an IRA between financial institutions can be accomplished through two primary methods: a direct transfer (also known as a trustee-to-trustee transfer) or an indirect rollover. A direct transfer is the more straightforward option. In this method, funds move directly from the existing IRA custodian to the new custodian without the account holder taking possession.

This ensures the transfer is not considered a distribution, avoiding tax withholding, the 60-day rollover rule, and the one-rollover-per-year limitation. Direct transfers are non-reportable to the IRS. There is no limit to the number of direct transfers an individual can make in a year.

An indirect rollover involves the IRA owner receiving funds from their current IRA. The owner then has a 60-day window to redeposit the funds into another IRA or retirement account. Failure to redeposit within 60 days results in a taxable distribution, and a 10% early withdrawal penalty may apply if under 59½. When funds are received, the distributing institution may withhold 20% for federal income tax, even if rolling over the full amount. The account holder must redeposit the entire withdrawn amount, including withheld taxes, within 60 days, often requiring other funds to cover the withheld portion.

The “one-rollover-per-year rule” limits an individual to only one IRA-to-IRA indirect rollover within any 12-month period, regardless of the number of IRAs owned. This rule applies across all types of IRAs, including Traditional, Roth, SEP, and SIMPLE IRAs. If a second indirect rollover is attempted within the 12-month period, it will be considered an ineligible rollover, making the distribution taxable and potentially subject to early withdrawal penalties and excise taxes.

Preparing for an IRA Transfer

Before initiating an IRA transfer, several preparatory steps ensure a smooth transition. First, determine the specific IRA type being transferred: Traditional, Roth, SEP, or SIMPLE. Understanding the account type dictates tax treatment and compatibility with the receiving institution. For instance, a Roth IRA must generally be transferred to another Roth IRA to maintain its tax-free growth and withdrawal benefits.

Gather all necessary account information from the current institution. This typically includes the full account number, the precise name of the current custodian, and contact details for their transfer department. Obtain recent account statements to verify current holdings and values.

Thoroughly research the prospective new financial institution. Evaluate investment options (mutual funds, ETFs, stocks, bonds, CDs) and compare fee structures, including annual maintenance, transfer fees, and trading commissions. Many institutions have eliminated some fees, but they still vary. Assess customer service and online tools. The new institution will have its own application process for opening the new IRA, separate from the transfer request.

Initiating and Completing the Transfer

Once preparatory steps are complete, initiating the IRA transfer typically begins with the new financial institution. The new custodian generally coordinates the transfer. You will usually need to complete an IRA Transfer Request Form provided by the new institution. This form requires account information from your current institution, such as your existing IRA account number and the relinquishing custodian’s name.

Along with the transfer request form, you may need to complete a new account application for the IRA at the receiving institution if you do not already have an account. Supporting documentation, such as a recent statement from your old IRA account, might be requested to verify ownership and details. Ensure all forms are completed accurately and legibly to avoid delays.

After submitting the necessary forms (online, mail, or in person), the new institution will send the transfer request to your current IRA custodian. The transfer process can take one to three weeks, though some transfers may take longer depending on the institutions involved. During this period, monitor the progress by checking with both institutions. If unexpected delays occur, following up with the new institution can help expedite the process. Once complete, verify that the funds have been successfully received by the new institution and that your old account is closed, if intended.

Important Considerations for Transfers

When moving an IRA, several considerations can impact the process and your retirement savings. While direct transfers are tax-free, indirect rollovers carry specific tax implications. Missing the 60-day deadline for an indirect rollover results in a taxable distribution, and a 10% early withdrawal penalty may apply if under 59½. The “one-rollover-per-year” rule for IRAs applies to indirect rollovers, limiting you to one such rollover across all your IRAs within a 12-month period. Violating this rule can lead to taxable distributions and penalties.

Fees are another consideration during a transfer. While many institutions do not charge for incoming transfers, the relinquishing institution may levy a transfer or account closing fee, typically ranging from $25 to $100. Inquire about all potential fees from both your current and new financial institutions before initiating the transfer. Beyond transfer fees, be aware of ongoing account maintenance fees, trading commissions, or investment management fees at the new institution, as these can impact your overall returns.

The timing of the transfer can also be a factor. Transfers typically take several weeks, during which your assets may be in transit and unavailable for trading or investment. Do not initiate a transfer if you anticipate needing to make investment changes or access funds immediately. Confirming that the new institution offers your desired investment options ensures your investment strategy remains aligned with your financial goals after the transfer.

Finally, review and update your beneficiary designations at the new institution. Beneficiary designations on IRAs supersede instructions in a will, so ensuring they are accurate reflects your current wishes for your assets upon your death. This step is often overlooked but is important for effective estate planning and ensuring your assets are distributed as intended.