60-day rollover question

Submitted by Andy Young on Mon, 2019-07-08 13:40

After reading Ed’s July 2019 IRA Advisor it made me think about a potential situation for clients and using the 60-day IRA rollover.

Let’s say that a 68-year old client is relocating and wants and doesn’t want to obtain short term financing. Their current house is sold, but they close on the new house prior to their current house. Initially they think they will only need about $100k.

They $100k out of their IRA on May 17th with the intention of putting all of that back in within the 60-day window. They realize on May 24th that they need an additional $25k. They take the additional $25k out with the intention of putting that back in as well after the closing of their current home.

Is the client able to put all $125k back in or are they limited to just one of the distributions?

Thank you



Submitted by Alan - IRA critic on Mon, 2019-07-08 15:55

  • Under the one rollover limitation only one of those distributions (or part of one) can be rolled back within 60 days. So called IRA loans are particularly problematic when it comes to real estate since real estate closing dates are notoriously unpredictable. The revised one rollover limit made a few years ago eliminates the options of using multiple IRA accounts and distributions to extend the rollback period several months.
  • While this client can only roll back 100k at best, there are a couple of strategies that can improve the situation at least partially by eliminating tax and/or penalty. First, if the client has a 401k plan that accepts IRA rollovers, they might be able to roll the 25k into their 401k since the one rollover limit does not apply when there is a non IRA plan on one end of the transfer. Another possible solution is to convert the 25k to a Roth IRA as this preserves IRA status. The conversion will still be taxed, but there is no penalty (for client’s under 59.5) and the Roth will be free of RMDs and taxes if distributions are needed.

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