The process of rolling a traditional IRA from one institution to another may be a tricky affair. The decision may be based on better profits or higher investments. However, some people always end up making very critical mistakes that result in losses and penalties. IRA rules occasionally change as years go by and a client may be misinformed to some extent. It is therefore important to know where one is likely to go wrong to avoid losing money. Below are some rules to watch out for when conducting a Rollover in Colusa.
The One Year Waiting Rule
In 2014, a court decision made a crucial tax ruling. Once a person has already distributed assets and done a rollover of the remainder, the tax-free rollover is locked for another year. Previously, if someone had another IRA that did not roll the money into or out in the previous year, it still had a chance of doing a tax-free rollover. Currently, no other IRA can do any rollover once one is made. Any other rollover within the year is counted as a withdrawal which will attract taxes.
The 60-day Waiting Rule
After receiving funds in an IRA, one has a window period of 60 days to rollover the funds to another IRA. The 60 days are not equal to two months. Some people forget and exceed the number of days. If no extensions or waivers were given, the IRS will treat it as any other income and will impose taxes on it. Similarly, persons below the age of 59½ will get a 10% penalty because of early withdrawal.
Rods Are Not Allowed To Do Rollovers
Tax-free rollovers can be done at any age. However, persons above 70½ years cannot rollover their annual RMDs as it would be an excess contribution. For individuals who need to take RMDs every year, they need to omit that year’s RMD from their IRA before finally kick-starting the rollover.
Not making a rollover is not the best decision. It is easy to forget and remain unworried since it’s something not thought about every other day. However, leaving the money in that account will only attract fees and offer little investment choices. For a person who needs to get more information about Rollover in Colusa, he or she needs to get in touch with a wealth management firm.