Do You Know the Differences Between Transfers, Rollovers and Contributions?

Estimated reading time: 2 minutes, 19 seconds

When saving for retirement, it’s important to fully understand the type of account you hold and the options you have in order to properly move funds into your account. Do you want to move your retirement savings into a self-directed IRA? If you are unsure about the process, this article provides a brief description of the differences of transfers, rollovers and contributions.

Contact your custodian directly for specific details on processing times and required paperwork regarding any of the below methods.

 Moving Retirement Assets From an Existing Account          The Differences Between Transfers, Rollovers and Contributions

  • Transfers: Your current trustee or custodian directly transacts with your new trustee or custodian, moving assets from one like account to another. (Ex. Moving funds from a Traditional IRA to another Traditional IRA.)
  • Direct Rollovers: Your current trustee or custodian directly transacts with your new trustee or custodian in the movement of funds from one retirement account to another. You never actually have control of the funds. (Ex. Moving funds from a 401(k) to an IRA, and the check is made payable to the IRA custodian.)
  • 60-Day, Indirect Rollovers: Your current trustee or custodian distributes plan assets to you. Then, you have 60 days to deposit the distribution into a new retirement plan and can complete only one within a 12-month period. (Ex. Moving funds from a 401(k) to an IRA, and the check is made payable to you and then you direct the payment to your IRA custodian.)

IRA Contributions

  • IRA Contribution: Money you contribute to a Traditional, Roth or other type of IRA in order to save for retirement. There are annual limits to how much individuals can contribute, and certain contributions may be tax-deductible, depending on the account owner’s income and employment situation.
  • Contribution Limits: You have the ability to make 2019 IRA contributions until April 15, 2020. Be sure to review the 2019 IRA contribution and deduction limits to ensure that you are taking full advantage to save for retirement.
  • Consult your tax professional or financial advisor to determine how much you should contribute to your retirement accounts.

 IRA Contributions after age 70 ½

  • Due to the newly enacted SECURE Act, Traditional IRA owners can now contribute after age 70 ½. Many people today continue working past the “normal retirement age”. Due to new legislation, some can keep contributing to their Traditional IRAs even after they reach age 70 ½.

 Additional Resources for Transfers, Rollovers and Contributions

Don’t hesitate to consult your tax professional or a financial advisor for more information. The IRS website is a helpful resource regarding all retirement plans. The IRS Retirement Plan FAQ page (along with the list below) are additional resources for information regarding all retirement plans.

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