Can I Roll One IRA Into Another?
When one of your individual retirement accounts isn't meeting your standards, the Internal Revenue Service doesn't force you to keep the money in the same IRA. Whether you want better returns, different investment choices, lower fees or better customer service, a rollover is one way to get your money out of the old IRA and into another one.
The IRS permits you to roll money from almost any tax-deferred IRA, like a traditional IRA, to any other IRA and from any Roth IRA to another Roth IRA. You can also you use a rollover to convert money from a tax-deferred IRA to a Roth IRA.
SIMPLE IRA Rules
SIMPLE IRAs have an additional restriction on rollovers. You're still allowed to roll over money from one SIMPLE IRA to another at any time, but you must wait at least two years after opening the SIMPLE IRA before you can roll it into any other type of IRA. For example, if you took a distribution from your SIMPLE IRA after one year, you could roll that money into another SIMPLE IRA, but not into your traditional or Roth IRA.
Waiting Between Rollovers
The IRS requires a 12-month waiting period before you start a second rollover from one of the involved accounts. This includes both the IRA that you took the distribution from and the IRA that you deposited the money into. For example, if you have two IRAs and you roll over money from one to the other, you must wait 12 months before doing another rollover. However, if you have three IRAs, you could roll money from one to another, and then roll money over from the third IRA at any time.
Rolling money from one tax-deferred IRA to another, or from one Roth IRA to another, won't generate any extra taxes during the year. But, you still report the rollover on your return to tell the IRS what you did. If, on the other hand, you rolled money from a tax-deferred IRA to a Roth IRA, you must pay taxes on the rollover. The amount of income equals the amount of the rollover that would have been taxable if you took the money as a distribution. For example, if your traditional IRA has no nondeductible contributions so all distributions are fully taxable, you must include the entire rollover as taxable income.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."