A Safe Retirement - Custodians, Rollovers, and IRAs
Unlike a normal investment which you can roll over many times, you can roll over or transfer a retirement account only once a year. There are rules that need to be adhered to. Usually it is wise to learn how you can transfer a retirement account before you even start to invest in one. If you do this, once you are in the situation where you have to roll over, you will not be unaware and will be prepared.
Before doing anything else, you should have an idea of where you would like to invest your funds before getting to the roll over process. The reason behind this is that you only have 60 days to put your money from your original IRA custodian into a new custodian fund. There are penalty taxes, which can be quite hefty, if you decide to wait too long. You must be sure to complete the rollover within 60 days, as afterwards the penalty tax comes into affect and it can ultimately affect the amount of money you have for your retirement.
If you do decide to ultimately roll over, you must report it at the end of the year. Much like any other aspect of your individual finances, you should stay on top of which custodians manage which accounts. You should also keep track of how much money you have in each account. Keep a record so you know exactly how much you have at all times and there are no surprises which can hurt you financially.
If you decide to go for a transfer that is of a relatively smaller amount from one IRA to another, then there is a possibility that you may not have to report the transfer at all. Many of these smaller transfers from one IRA to another are tax-free. In most cases, transferring less than five thousand dollars does not have to be reported, but talk with your broker and IRA custodian before making any decisions.
The keys to roll overs, IRAs, and custodians is staying on top of your finances and making sure you know how much you have, exactly where you have it, and where you want to have it.