Transferring a Roth to a Different Institution

[Guest ahstein]

After converting a traditional IRA to a Roth, I want to now tranfer the Roth from a bank (I'm not happy with) to an existing Roth brokerage account. Can I simply close one Roth account and deposit the check into the Roth brokerage account without tax consequences? My bank says no, unless I have the check from made out to the broker (for which they charge a fee). That doesn't make much sense to me. (One of the reasons I'm taking whatever money I still have in that bank and putting it elsewhere--very little of what they say makes sense and very little of what they say they'll do gets done.:<)

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Alan Stein

stein@math.uconn.edu

http://www.math.uconn.edu/~stein

[Guest swilsonw]

You may perform a 60-day rollover. What that means is, you take a redemption from the Roth at the bank and mail a personal check for the same exact amount to your Roth at the brokerage. The brokerage must receive this money no later than 60 days from the day you receive the check from the bank.

If you have already done a 60 day rollover with the Roth at the bank in the past 12 months, then this is not an option as only one 60 day rollover may be performed in a 12 month rolling period (1998 IRS Pub 590, pg 15).

If the 60day rollover is not an option, contact your broker. The broker should have paperwork for you to complete that will allow them to request the money from the bank directly.

Hope that helps.

[Guest ahstein]

I didn't do a rollover, but I did convert the account from a regular IRA to a Roth just last month. (Same CD, same account number.) Does that complicate things?

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Alan Stein

stein@math.uconn.edu

http://www.math.uconn.edu/~stein

[Guest John R Grossmann]

The prior advice was good. Use the forms at your brokerage to "pull" the money out of your bank. Note: you can do more than one IRA transfer in a year as long as you let the two custodians handle the money and you do NOT have any check sent to you. I would advise that you always do a custodian to custodian rollover when ever possible. It avoids the 60 day problem, such as the US mail loses your check and you fail to correct the problem before the 60 days expire. In this nasty scenario you have taken a distribution and now owe taxes and perhaps a penalty.

[Guest bschneider]

This question is similar to previous question, but want to make sure before taking action.

I did a conversion from an IRA to a Roth IRA in 1998. I would now like to move that money to a new broker. Because it takes so long to perfom a transfer, I would like to take a distribution, and do a rollover to a new broker into a conversion IRA, within the 60 days limit for rollovers.

Is there any concern or problem with this approach?

[Guest John R Grossmann]

To Bschneider: You should be able to complete a broker to broker IRA transfer in less than two weeks. One month would be a worse case for institutions that are incompetent or just plain difficult. Ask your receiving brokerage what to expect. The route you propose gets more complicated if the assets are anything other than cash. If you have stocks or mutual funds in your current IRA institution, I strongly recommend that you work directly with the second brokerage to get a direct transfer, because to "journal" or DTC equities is straight forward.

[Guest John R Grossmann]

To Ahstein: You said you did a Roth conversion at one institution and now want to do a 60 day transfer. The Roth conversion does not count against your 1 per year limitation for 60 day transfers.

[This message has been edited by John R Grossmann (edited 01-25-99).]

[Guest Donna]

After reading prior text on Roth IRA, and conventional IRA's, I'm rather confused. I was just going to convert my conventional IRA to a Roth, and purchase a Roth for 1998 at my bank. Now, I read that I need to pay taxes on the conversion of the conventional IRA, and I need to make decisions on how I want the Roth IRA set-up (mutual funds, etc.) Now another question has come up, "do I need to use a broker?" or "is using my bank okay?" I know utimately that I have to make all the decisions for my financial future / retirement, but some of this is just so intimidating. I'm afraid to make a decision, because it may be the wrong one.

[Guest John R Grossmann]

Donna: I am guessing that you are new to the IRA and investing issues and are perhaps just at the begining of your career. This forum is perhaps best used for specific questions. I will take a shot at one you asked, where do you put the IRA funds.

Three common choices are brokerages, mutual fund families, and banks. Each acts as a custodian of your funds. Your choice should depend upon your investment goals, planning timeframe, risk tolerance, need for advice, etc. In my experience, banks tend to offer more conservative options like CDs or sometimes a few bond or blue chip stock funds, you get face to face service. With a mutual fund family you will rely more on 800 numbers and snail mail, but typically have access to a wider array of investment options such as growth, blue chip, bond, sector or international funds. I would recommend that you contact a few no load families like Vanguard, Janus and discuss your situation. Both the risk and reward are higher than more conservative bank options. Funds hold lots of stocks, so you have some diversification, and the fund does the picking not you. Brokerages probably have the largest array of options in that you can buy bonds, individual stocks, mutual funds, etc. They can range from full service lots of advice and high cost to internet based do-it-yourself discount brokerages. You can have more than one IRA relationship of course.

The conventional wisdom is that if you are young, your IRA investments should be in stocks because of the higher expected returns over the long haul. If you are just starting out, you may want to consider an S&P500 index fund. They are simple, broadbased, low fees and serve you well for 10+ years until your retirement assets grow.

Hope this helps Blackstone.summit@worldnet.att.net