Who Is an IRA Transfer Custodian?

Transfer custodians move assets between your retirement accounts.

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Individual retirement accounts must follow rules that specify how you add money to them. You can make annual contributions based on the current Internal Revenue Service limits. You can also transfer money and property to and from an IRA, as long as the other account is qualified for these transfers. Transfer custodians help you move money between qualified accounts.


An IRA custodian or trustee is a bank, mutual fund or other financial institution approved by the IRS to administer IRAs. A trustee-to-trustee transfer requires two custodians or trustees -- one to dispatch the retirement assets and a second to receive them. You must inform both transfer custodians of your account numbers and of the money and property that you want to move. Transfers between traditional IRA accounts and between a traditional IRA and a traditional employer account, such as a 401(k) or 403(b), are tax-free. You can also transfer to a Roth account, but this might create taxable income.


If you don’t want to use transfer custodians to move your retirement assets, you can perform a rollover by withdrawing the assets from one account and contributing them to another within 60 days. If you roll over from an employer plan to an IRA, the plan’s custodian must withhold 20 percent of the amount you move. You can reclaim this withholding when you next file a tax return. You must reach into your own pocket to contribute the withheld amount or the IRS might tax it and assess a 10 percent early withdrawal penalty. You can perform an IRA-to-IRA rollover once every 12 months, put there is no waiting period for rollovers between IRAs and employer plans.


A conversion is a transfer or rollover from a traditional account -- employer or IRA -- to a Roth account, which accepts after-tax contributions and provides tax-free withdrawals. You must add the converted amount to your taxable income for the year. You don’t owe taxes on any nondeductible contributions, which you create in a traditional IRA when you or your spouse belongs to an employer plan and your income exceeds IRS limits. These income limits can change from year to year. You must prorate any nondeductible contributions when you do a partial conversion to a Roth IRA.

Conduit IRA

A conduit IRA is a holding account that contains only contributions transferred or rolled over from a qualified employer plan. The conduit also holds any earnings on the transferred assets. In all other respects, it’s a traditional IRA. The idea behind a conduit IRA is to segregate employer-plan money from other IRA funds, so that the owner can easily transfer them to a new employer plan. This overcomes the prohibition some employer plans have against rollovers from IRAs containing regular contributions.

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