When you're dusting off that old IRA, you may find you're no longer quite so fond of the old custodian and you want to move the money to a new financial institution. While there might not be an app for that, there are rules in the Internal Revenue Code that allow you to roll the money from one IRA to another as long as you redeposit your distribution within 60 days.
Investment Options and Fees
When you decide to move your IRA, make sure the financial institution that you roll it into offers the types of investments that you want and has low fees. If you like to stick to the basic investments like mutual funds or certificates of deposit, you can focus more on the returns generated and fees because most places have a range of investments to pick from. However, if you're into more unique investments for your IRA, like rental properties or peer-to-peer lending, you're going to have fewer options.
Combine With Employer Plan
Depending on your current employer, you might be allowed to roll your old IRA into your employer-sponsored retirement plan. Some companies, but not all, permit rollovers into 401(k), 403(b) or TSP plans. For example, if you work for a government agency you're allowed to roll your IRA into your thrift savings plan, which may save you money on investment fees while still providing a range of investment options.
If you're in a lower income tax bracket when you're rolling the money over than you expect to fall in when you retire, consider converting your old IRA to a Roth IRA. You must pay income taxes on the conversion, but when you take qualified Roth IRA withdrawals, you won't pay taxes on the converted amount or any future earnings, giving you a tax-free cash stream to light up your golden years. However, if you don't have the money to pay the taxes on the conversion or you think you're in a higher bracket now that you will be at retirement, you're often better off leaving the money in a traditional IRA.
If you're not going to use the money for short-term needs during the time you take the money out of your old IRA and before you deposit it in your new IRA, consider using a transfer instead of a rollover. The transfer moves the money straight from the old IRA to the new one without a distribution to you in the middle. The end result is the same -- the money is moved into a new account -- but you can do as many transfers as you want each year and you don't have to go through the hassle of reporting it on your taxes -- unless of course you're converting to a Roth IRA. Plus, with a transfer, there's no danger of missing the 60-day deadline.
- Internal Revenue Service: Publication 590 -- Individual Retirement Arrangements (IRAs)
- TIAA-CREF: Why Convert to a Roth IRA?
- Thrift Savings Plan: Rollovers and Transfers into the TSP: Benefits of Moving Your Money to the TSP
- Money Girl: How to Choose an IRA Custodian
- Wealth Pilgrim: How to Pick the IRA Custodians
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