Hello!

I have passed the 2 year anniversary of my first contribution to my SIMPLE IRA, so I am now able to move my money out of the SIMPLE IRA into a Traditional IRA at another institution. The financial institution for the SIMPLE IRA is American Funds and the existing Traditional IRA is at Vanguard.

American Funds has a form they call a “SIMPLE IRA Transfer Election Form” that can set up an automatic monthly transfer from the American Funds SIMPLE IRA to another institution’s SIMPLE IRA. This form is used if the employer designated American Funds as the designated financial institution (DFI) and transfers the money out without cost or penalty to me. However, this form applies for transferring from SIMPLE IRA to SIMPLE IRA only.

When I called American Funds and asked them if I can fill out this form and use it to transfer from the SIMPLE IRA to a Traditional IRA, I was connected to one of their in-house financial advisers, and he said I cannot use that form. However, he did say that I could write a letter asking for a monthly withdrawal from my American Funds account in the form of a check, to be mailed to Vanguard and deposited into my Traditional IRA account number, to be invested in a specific fund. All I would have to do is get a Medallion Signature Guarantee on the letter and it would establish an automatic monthly transfer to Vanguard.

I called Vanguard to verify that if they received a monthly check from American Funds with my Traditional IRA account number and the fund to invest in, would they be able to put the money in my existing Traditional IRA. The Vanguard account representative said they would be able to accept the money and place it in my Traditional IRA every month. Success, right?

The only hangup I can see is that the Vanguard representative said to make sure that the monthly check from American Funds specifies that it is a rollover/transfer situation. My question for the forum is this: does the terminology of rollover or transfer need to be specifically indicated one way or the other? Since the check will be made out to Vanguard, it will be a trustee-to-trustee transfer and not subject to any 1-year waiting period since I won’t take possession of a check and it won’t be written out to me, correct?

Thank you for clarifying!