New IRA Rollover Rules
I am retired and 65 years old. I am currently doing income planning.
I just transferred funds from a 401k to an annuity with an insurance company. The annuity is a Traditional IRA. I suppose this was considered a rollover. I am confused as to the new IRA rollover rules that became effective on the in January. I still need to move the balance of the 401k out because I do not want to risk it in mutual funds since I am no longer working. I intended to move the remaining 401k funds to Traditional IRA CD’s at possibly several different financial institutions. I also have a ROTH IRA in mutual funds that I intend on moving to a different financial institution. How do the new rules apply? I need to get this set up next month.
Thanks
Permalink Submitted by Alan - IRA critic on Fri, 2015-02-06 22:55
Rollovers in and out of a 401k do NOT count against the one rollover rule. What you need to be careful of is when the CDs expire you will be forced to use a direct trustee transfer to move funds to a different institution because you can only do ONE indirect rollover (check made out to you personally) over a 12 month period. Perhaps it would be easier to use brokered CDs in a brokerage IRA. With those you can select CDs of many different banks all in a single IRA account and when they expire your money is held in a money market fund until you purchase another CD from their inventory. You never have to change IRA accounts and do not have to worry about rollovers or transfers. These brokered CDs cannot be redeemed with an early withdrawal penalty, you must sell them in the IRA account on the open market if you do not hold them to maturity. They are generally fully insured by the FDIC. That said, CDs still are paying almost nothing unless you go out 3-5 years. I do not think you should entirely abandon stock mutual funds if you want any growth at all. Hasn’t your Roth produced some decent returns in recent years?
Permalink Submitted by John Fedchak on Sat, 2015-02-07 06:38
So, if I understand correctly, there is not a limit on direct custodial transfers?
Permalink Submitted by Alan - IRA critic on Sat, 2015-02-07 18:38
Correct. No limit on transfers or any rollovers from 401k plans regardless of how completed.