Questions concerning IRA Rollover

Submitted by Philip Thorrez on Fri, 2019-02-01 15:43

I want to move my IRA to from a bank where is is currently held to a brokerage company.
The bank is unable to do an “in kind” move; they have to liquidate the holding and transfer cash. In all this will take five to seven business days.
The current and future IRA will be invested in an index fund.
With the volatility in the market, I am concerned that I could lose 1 – 2% in the 5 – 7 days it takes to make the move.
I have enough cash to cover the amount in my IRA. Can I use that cash to buy a fund in the new IRA before I actually receive the distribution from liquidation of my current IRA?
To clarify: On the same day I tell the current custodian to sell, I would buy an exact amount in the new IRA account. I would not actually receive the funds from the liquidation of my current IRA until a few days later.

There is a secondary issue if I take a distribution. I turn 70-1/2 this year, but WILL NOT BE 70-1/2 when these transactions take place. Can I reinvest the entire amount of the liquidation or must I take the RMD now?

Thank you for your consideration.



Submitted by Alan - IRA critic on Sat, 2019-02-02 00:13

  • There are several issues here. First, any distribution  you receive this year is applied first to your RMD for the year and the RMD is not eligible for rollover. But if you did a direct trustee transfer sent from the new brokerage account to the bank, there would be no distribution, and you could take your RMD later. If you have a maturing CD with the bank, the usual practice is to extend the maturity date 10 days, during which period there is no penalty for drawing out the funds by distribution or transfer.
  • Another concern is the one rollover limitation for 12 months for all your IRAs. If you receive a distribution you can roll over the excess of your RMD only if you have not done such a rollover in the prior 12 months. If you are clear to do the rollover, then you would not be able to do another one for 12 months in the future.
  • Finally, you cannot advance the rollover before the date you actually receive a distribution, because you do not have the funds to roll over until you receive them. A rollover before receipt would be treated as an excess IRA contribution.
  •  So you are juggling your RMD, the one rollover limitation, and being out of the market, all timing issues. The last issue is of the least importance. Many banks are not helpful in explaining any of this. You might be forced into a distribution if you cannot do a direct transfer at this point, and if so I hope you have one available. 

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