How to Transfer an IRA to Another Bank

Transferring an Individual Retirement Account (IRA) between financial institutions is a common practice allowing individuals to consolidate or move their retirement savings. This process enables account holders to seek out institutions that may offer better investment options, lower fees, or enhanced services, all without incurring immediate tax liabilities. Understanding the correct procedures for an IRA transfer is important for a smooth transition of retirement funds.

Choosing Your IRA Transfer Method

When moving an IRA, two primary methods are available: the direct trustee-to-trustee transfer and the indirect (60-day) rollover. Each method involves distinct mechanics for handling the funds.

A direct trustee-to-trustee transfer involves the money moving directly between the relinquishing and receiving financial institutions. The account holder never takes physical possession of the funds, which simplifies the process and avoids tax implications. This method is preferred due to its streamlined nature and the absence of tax withholding concerns.

Conversely, an indirect, or 60-day, rollover means the funds are distributed to the account holder. The individual then has a strict 60-day window to redeposit the entire amount into a new IRA at a different institution. If the funds are not redeposited within this timeframe, the distribution may become taxable income and could be subject to early withdrawal penalties if the account holder is under age 59½. This method places the responsibility on the account holder to meet the deadline and manage the funds temporarily.

Gathering Information for Your Transfer

Before initiating any IRA transfer, it is necessary to compile information and documentation. This step helps ensure accuracy and efficiency throughout the transfer process.

You will need account details for both the existing and the new IRA. This includes account numbers, account types (e.g., Traditional IRA, Roth IRA, SEP IRA), and names and contact information for both the current and the receiving financial institutions. Having recent account statements from your current IRA available is advisable, as these documents provide reference details.

Both financial institutions will require personal identification information. This includes your Social Security Number and date of birth. The receiving financial institution provides the necessary transfer authorization forms, which can be obtained online or by request. Accurately complete all informational fields on these forms to avoid delays in processing.

Initiating and Monitoring the Transfer

Once all information has been gathered and forms prepared, the next step involves initiating the transfer and monitoring its progress. The process begins by submitting the completed transfer authorization form to the new financial institution. This submission can be done through an online portal, via mail, or in person, depending on the institution’s procedures.

After receiving your authorization, the new institution will contact your current financial institution to request the transfer of assets. For direct trustee-to-trustee transfers, the funds move directly between the institutions, which prevents tax withholding. There are no limits on the number of direct trustee-to-trustee transfers you can complete in a year.

For an indirect, or 60-day, rollover, you must redeposit the funds into the new IRA within 60 days from the date you received the distribution. Failure to meet this strict deadline can result in the entire distribution being treated as taxable income, and if you are under age 59½, it may also incur a 10% early withdrawal penalty. While the IRS may waive the 60-day requirement in certain circumstances, waivers are not automatic and require specific conditions. Only one indirect IRA-to-IRA rollover is permitted within any 12-month period.

Throughout the transfer process, regularly check with both financial institutions for status updates. Transfer timelines can vary, but range from one to two weeks, though some may take longer. Clear communication with both institutions can help address delays or questions promptly.

Confirming Your Completed Transfer

After the expected transfer period, confirm the successful completion of your IRA transfer. Verify that the funds have arrived in your new IRA account and that the amount is accurate. Review your new account statements and confirm your old account reflects the full transfer out or closure, as applicable.

Maintain records of all transfer documentation for future reference and tax purposes. Include copies of submitted forms, statements from both institutions, and any related correspondence. These records are useful if discrepancies arise or for tax reporting.

Finally, consider administrative updates at your new institution. This may involve consolidating online access, confirming or updating your beneficiary designations, and reviewing your investment allocations to align with your financial objectives.