How Many IRA Transfers Can You Make Per Year?

Individual Retirement Arrangements (IRAs) serve as a common savings vehicle for retirement, offering tax advantages that encourage long-term growth. Managing these accounts sometimes involves moving funds between them, whether to consolidate assets, seek different investment options, or for other financial planning purposes. Understanding the specific rules governing these movements is important to avoid unintended tax consequences. This article clarifies the regulations surrounding how often funds can be moved, distinguishing between various transfer methods and their associated limitations.

Understanding the One-Per-Year Rollover Limit

The “60-day rollover” involves the IRA owner taking temporary possession of their retirement funds. The individual must redeposit the entire distributed amount into another IRA or eligible retirement plan within 60 calendar days of receiving the distribution to avoid taxes and penalties. For example, if you receive a check for your IRA distribution on June 1st, you have until July 31st to complete the rollover.

A significant rule governing indirect rollovers is the “one-per-year” limit. This restriction applies to the individual taxpayer, not to each IRA account they own. If a taxpayer performs an indirect rollover from one IRA, they generally cannot perform another indirect rollover from any of their IRAs for 12 months from the date they received the initial distribution. This means that a rollover from a traditional IRA would preclude another indirect rollover from a Roth IRA, and vice versa, within that 12-month period.

The 12-month period for this rule begins on the date the IRA distribution is received by the taxpayer, not when the funds are redeposited. If the 60-day deadline is missed, or if the one-per-year rule is violated, the distributed amount becomes taxable income in the year it was received. For instance, if you receive a $20,000 distribution and fail to redeposit it within 60 days, that $20,000 becomes fully taxable.

If the individual is under age 59½ and fails to meet these requirements, the distributed amount may also be subject to a 10% early withdrawal penalty. The Internal Revenue Service (IRS) requires financial institutions to report IRA distributions on Form 1099-R. This form details the gross distribution and taxable amount, which is used when filing an individual’s tax return.

Direct IRA Transfers

Direct IRA transfers, also known as trustee-to-trustee transfers, offer a more straightforward method for moving retirement funds. In this process, funds are moved directly from one IRA custodian to another without the IRA owner ever taking possession of the money. For example, if you want to move your IRA from Bank A to Brokerage B, you would instruct Brokerage B to request the funds directly from Bank A.

Direct transfers are not subject to the one-per-year rollover rule and are unlimited in frequency. An individual can initiate multiple direct transfers between their IRAs within a 12-month period without any restrictions. This method is generally preferred by financial professionals because it eliminates the risks associated with indirect rollovers.

The process begins with the IRA owner contacting their new IRA custodian. The new custodian then initiates the transfer by requesting the funds directly from the old custodian. This direct movement ensures the funds maintain their tax-deferred status without interruption.

Since the IRA owner never takes possession of the funds, there is no risk of missing the 60-day deadline, which could trigger a taxable distribution and potential penalties. Direct transfers are not reported as distributions to the IRS on Form 1099-R. This streamlined approach provides security and flexibility for managing IRA assets.

Exemptions from the Rollover Limit

Several types of fund movements are not counted towards the one-per-year indirect IRA rollover limit. These specific scenarios are treated differently under IRS regulations.

Rollovers from employer-sponsored plans into an IRA are distinct from IRA-to-IRA rollovers and do not count against the one-per-year limit. If you leave a job and roll over your 401(k), 403(b), or 457(b) plan balance into a traditional IRA, this transaction will not prevent you from performing a separate indirect IRA-to-IRA rollover within the same 12-month period.

Converting funds from a Traditional IRA to a Roth IRA does not count towards the one-per-year limit for other IRA rollovers. The IRS treats Roth conversions as a separate transaction for this rule. This allows individuals to convert pre-tax funds to Roth accounts, paying taxes upfront to enjoy tax-free withdrawals in retirement, without impacting their ability to conduct a different indirect IRA rollover.

Trustee-to-trustee transfers are always exempt from the one-per-year limit. Direct movements of funds between IRA custodians, where the IRA owner never takes possession of the money, can be performed as frequently as needed without triggering the annual restriction. The IRS recognizes these as transfers, not rollovers, under Internal Revenue Code Section 408(d).

Rollovers of qualified plan loan offsets fall outside the standard 60-day rollover period and the one-per-year limit. A qualified plan loan offset occurs when an outstanding loan from an employer-sponsored plan is treated as a distribution due to job termination or plan termination. The rollover deadline for these offsets is extended until the participant’s tax filing due date, including extensions, for the taxable year in which the offset occurs. This extended period allows more time to roll over the amount to an eligible retirement plan or IRA.

Rollovers from a deceased spouse’s IRA to a beneficiary IRA are also exempt from this annual limit, especially when a surviving spouse treats the inherited IRA as their own. This allows the surviving spouse to combine inherited funds with their own IRA or treat the inherited IRA as their own, postponing required minimum distributions (RMDs) until their own applicable age.