IRA 60 day rollover rule

Submitted by Daryl Phillips on Thu, 2018-11-29 17:30

If a person takes two separate withdrawals from their SEP-IRA ($2,500 and $10,000 within two weeks), then reinvests those funds within 60 days as one single deposit of $12,500, does that qualify as “one” rollover within the IRS mandated 12 month period? Thanks.



Submitted by David Mertz on Thu, 2018-11-29 17:40

The rule governs the number of distributions that can be rolled over, not the number of rollover contributions that can be made.  Rolling over the entire $12,500 would be a rollover of two distributions, in violation of the rule.  Only one of these distributions is permitted to be rolled over.

Submitted by Alan - IRA critic on Thu, 2018-11-29 17:50

  • Unfortunately, it does not.  The one rollover limit per 12 month period is measured by the number of distributions, not the number of rollover contributions.  In this case, the person could only roll back one of these distributions, and would likely choose the largest one. The person would be stuck with a taxable distribution (plus penalty if applicable) on the smaller (2,500) distribution.  To preserve IRA assets, the person could opt to convert the 2500 distribution to a Roth IRA since conversions are exempt. While the conversion would also be taxable, there would be no penalty and the 2500 would still be in a retirement account (Roth) with more favorable long term tax implications than the TIRA. This would somewhat limit the damage.
  • Conversely, because the one rollover limit is measured by the distribution, it would be OK if the person distributed 12,500 at one time, but then split up the rollover contributions to several different IRA accounts on different dates as long as the entire 12,500 was rolled over within 60 days.

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