IRA transfer / rollover?

[Guest Carl C]

I have a traditional IRA account at a brokerage firm. I want to move some of the funds (not all) to a new firm (new IRA account). The new firm is telling me they can transfer all or none. They told me to withdraw what I want out of the old firm, and wire the funds to the new account.

The old firm will allow me to select whether I want them to withhold any funds withdrawn for taxes. If I select "No", withdraw the amount I want, and wire it to the new firm within 60 days, is this allowed so as not to trigger an early withdrawl of the IRA account?

Carl C

[mbozek]

I dont understand what you are trying to do. A transfer of IRA funds from one trustee to another trustee is not considered to be a distribution and there is no withholding. If you recieve a check from a custodian you can elect out of the 10% withholding and roll over the check to another IRA custodian within 60 days.

[WDIK]

Why is the recipient firm saying they can either transfer all or none? Wouldn't it be the current custodian that would make the transfer?

[Guest Carl C]

I should have made myself a little clearer. The form to do a direct custodian to custodian transfer (without me every personally handling the funds), which is provided (the form that is) by the new broker/custodian, only states to transfer ALL assets from the old account to the new. I told the new broker that I only wanted a part of the old account to be transferred to the new, he said he couldn't do it. He said to withdraw the funds from the old, then wire the proceeds to the new account. In that case I WOULD personally handle the money, even if for a day or two.

With regards to the 60 day rule to put the money back and not be considered a distribution, I didn't know if the money HAD to go back to the original account it was drawn against, or if it could be put back into ANY like IRA account within 60 days.

Carl C

[John G]

Carl, where did you find this new custodian? Lots of custodians allow a partial rollover of assets of an IRA. Often the form allows you to specify which assets you want rolled over.... a specific stock, a group of mutual funds, cash, etc. The lack of flexibility of the new custodian is a warning sign of potential future problems. {a word of caution - IRA offices often goof on following the instructions, so they may try to transfer all the funds even when you said only partial. Partial is not a common transaction.}

Why did you pick them? If they won't do what you want, find another custodian!

What the new custodian suggests is stupid. It is suggested as a patch for their convenience, not yours. Anytime you receive a check from an IRA, you increase the chances of a foul up or a failure to complete the transaction. I highly recommend that you do not follow this "advice". Yes, you have the 60 day rule.... but the devil is in the details - not just the 60 days, but also only one transaction in a year. Then you have custodian misunderstandings about witholding. Plus their are "termination fees" - otherwise known as "gotcha".

You are complicating your life by splitting one account into two. I sure hope you have a compelling reason. That you wish to let some assets remain with the first firm would suggest that you are not reacting to admin screw ups.

I would be interested in why you are considering the split.

[Appleby]

Carl C,

Talk to someone else at the new Custodian or have your account representative do so.

There are (at least) two kinds of transfers for ACAT eligible firms- ACAT and non-ACAT transfer. An ACAT transfer can be done by some financial institutions – not all…An ACAT transfer must be a full ( total account balance) transfer. A non-ACAT transfer is done by firm that are not eligible to do ACAT transfers. Firms who are eligible to do ACAT transfers, must use the non-ACAT transfer when transferring only a portion of the account balance

[John G]

Appleby, thanks for the post. I learned something new - is there a good reason for two kinds of procedures?

Yes, talk to someone else. Preferably talk to the backroom IRA department. The general front desk folks at most brokerages, banks and mutual funds are often the least trained staff. Any time you have a unusual question or problem, seek the pro (perhaps in the home city of your custodian) to get your question answered. Eligible investments, partial transfers, rollovers, conversions, early distributions, etc. all fall into this category of find the specialist.

[Appleby]

The main reasons for having two separate procedures are

1) The ACAT delivery is an automated process which a firm can access for use only if the firm is a http://www.nscc.com/directory/ NSCC settling member or a DTC member bank

2) The ACAT delivery system cannot accommodate transfers of balances unless the full balance is being transferred. I hear there are discussions about improving the system so that it can accommodate transfers of fractional balances. If this comes to fruition, only non-member firms will use the non-ACAT method

Firms that are not NSCC settling members or DTC member banks, may use a manual means of delivery ( non-ACAT )…The manual mode is also used in instances where member firms are unable to use the ACAT system, such as when only a fraction of the account balance is being transferred.