What to Know About IRA Transfer Bonuses and How They Work
Understand how IRA transfer bonuses work, including payout timing, tax implications, and common requirements to make the most of your retirement savings.
Moving retirement savings between financial institutions can come with incentives, including IRA transfer bonuses. These offers attract new customers by providing cash rewards or other perks when transferring assets into an IRA at a new brokerage or bank. While appealing, these bonuses have specific requirements that investors should evaluate to ensure they align with long-term financial goals.
Common Transfer Bonus Structures
Brokerages use different structures to incentivize IRA transfers, often tailoring offers based on the amount moved. The most common is a tiered cash bonus, where rewards increase with larger transfers. For example, a brokerage might offer $100 for a $25,000 transfer, $500 for $100,000, and $2,500 for $1 million or more, encouraging larger transfers with disproportionately higher rewards.
Some firms take a percentage-based approach, offering a fixed percentage of the transferred amount as a bonus. A 1% bonus on a $250,000 transfer would yield $2,500, which may be more competitive than a tiered structure at that level. However, these offers often have caps, limiting the maximum payout.
Other promotions include commission-free trades, reduced advisory fees, or account credits for future investments. Some brokerages also reimburse account closure fees charged by the outgoing institution.
Funding and Transfer Requirements
Financial institutions impose conditions on how IRA transfers must be funded to qualify for bonuses. Some require direct trustee-to-trustee transfers to maintain tax-deferred status, while others allow indirect rollovers but mandate that funds be deposited within 60 days to avoid IRS penalties.
Minimum deposit thresholds vary, with some firms requiring as little as $10,000, while others demand significantly larger transfers. Certain holdings, such as annuities, alternative investments, or proprietary mutual funds, may be excluded from counting toward the qualifying balance. Investors transferring ineligible assets may need to liquidate and reinvest, potentially incurring trading fees or tax consequences.
Many promotions require funds to be deposited within 60 to 90 days of account opening. Missing this deadline can forfeit the bonus. Some brokerages also impose a holding period—typically six months to a year—during which transferred assets must remain in the account to prevent early withdrawals that could void the incentive.
Key Tax Considerations
IRA transfer bonuses are considered taxable income, reported on Form 1099-MISC or Form 1099-INT. Unlike investment gains within an IRA, which grow tax-deferred, these bonuses are subject to ordinary income tax rates, ranging from 10% to 37% in 2024.
A large bonus could push an investor into a higher tax bracket, potentially reducing eligibility for deductions or credits. For instance, a $2,500 bonus could increase taxable income enough to phase out direct Roth IRA contributions, which are limited to those with a modified adjusted gross income below $161,000 for single filers or $240,000 for married couples in 2024.
State taxes also vary. Florida and Texas do not tax earned income, while high-tax states like California and New York impose rates as high as 13.3%. Investors should review state tax laws or consult a tax advisor to assess the full impact.
Limits on Bonus Amount
Financial institutions cap bonuses to control costs. Some brokerages limit payouts to $2,500 or $5,000, while others offer up to $10,000 for ultra-high-net-worth transfers. Investors moving assets above these limits will not receive additional incentives, making it important to assess whether a transfer still aligns with broader financial objectives.
Some firms impose per-account limits rather than per-client restrictions. This means an individual transferring funds into multiple eligible IRA accounts—such as a traditional IRA and a Roth IRA—could receive separate bonuses for each. However, household-level restrictions may prevent multiple bonuses across accounts held by spouses or dependents.
Timing of Bonus Payouts
The timeline for receiving an IRA transfer bonus varies. Some brokerages credit bonuses within 60 to 90 days after verifying the transfer, while others process payouts in batches, meaning early transfers may not receive bonuses until a designated date.
Delays can occur if additional documentation is required, such as proof of an external account closure. Investors should track their expected payout date and follow up if the bonus is not received within the stated timeframe.
Potential Restrictions
IRA transfer bonuses often come with restrictions. Many brokerages require transferred assets to remain in the account for six months to a year to prevent immediate withdrawals. Exiting before this period may result in forfeiture of the bonus or account closure fees.
Some promotions exclude specific account types or funding sources. Internal transfers from existing accounts at the same institution may not qualify, and some firms require that assets remain in cash or be invested in proprietary funds for a set period. Investors should review these conditions to ensure they align with their broader financial strategy.