Among the many reasons to love IRAs is their portability—if you want to switch to an investment that’s better suited for your needs, you can move providers without having to pay taxes or penalties.
rHowever, in January 2015, the IRS announced new guidelines for moving an IRA from one brokerage, or trustee, to another. The new rule limited what had been typically called an “indirect rollover”—where an IRA owner takes a distribution of all or part of the account and moves it into a new IRA. Now, most customers changing providers will now use a direct transfer method.
What Is a Direct Transfer?
A direct transfer moves assets between accounts of the same type from one provider to another. This move is not considered a distribution and is therefore not taxable as income or subject to any penalties for early distribution. The transfer is conducted via the providers, and the IRA owner does not handle the funds in any way. There is no limit on how many direct transfers an IRA owner utilizes in a year.
How It Works at Betterment
A transfer of your IRA funds to Betterment is easy and can be completed online with our automated tools. After you’ve logged in and created a Betterment profile, follow these three simple steps:
- Click the “Transfer” button from the Summary tab of your account. On the Transfer tab, click “Roll over an IRA or 401(k).”
- Enter information for the account that you are transferring to Betterment, and Betterment will instantly generate the transfer paperwork.
- E-sign the form online, and Betterment will submit it to your provider.¹
In most cases, your funds will be received and invested in four to five days for electronic transfers, and a minimum of seven to fourteen days for direct transfers via check. We will let you know as soon as they arrive.
Note that some providers may require physical paperwork or a medallion signature: If your provider requires this, then Betterment will prepare a pre-filled PDF that you can print out, sign, and send to your provider.
New: A Limit on Indirect Rollovers
In the past, people could utilize what was called an “indirect” rollover, where they could take a distribution of some or all of an IRA and move to another IRA without a third party. Withdrawals simply went through the account holder’s checking account. It was a quick and convenient way to move money, but the danger to this method was that the money—if not transferred in full or within 60 days—could be deemed as taxable by the IRS.
After 2015 IRA owners are now limited to one indirect rollover per year, no matter how many IRAs they own. (You can refer to additional IRS guidelines here.)
We’re Here to Help
We streamlined the rollover process to help you get into your new Betterment portfolio as quickly and stress-free as possible. Remember, if you have questions about moving your IRA to Betterment, we have rollover experts on hand seven days a week to answer your questions. Ready to roll your money over to Betterment? Get started today.
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Betterment is not a tax advisor, and this post is not tax advice. Please seek out qualified professionals that provide advice on these issues for your specific circumstances.
¹The process is currently automated for rollovers from select providers. If you have a provider that is not part of our automated process, you will receive an email with a checklist for completing your rollover to Betterment.
When deciding whether to roll over a retirement account, you should carefully consider your personal situation and preferences. The information on this page is being provided for general informational purposes and is not intended to be an individualized recommendation that you take any particular action.
Factors that you should consider in evaluating a potential rollover include: available investment options, fees and expenses, services, withdrawal penalties, protections from creditors and legal judgments, required minimum distributions, and treatment of employer stock. Before deciding to roll over, you should research the details of your current retirement account and consult tax and other advisors with any questions about your personal situation.