Banks act as custodians for customers' Individual Retirement Accounts. IRA accounts often take the form of certificates of deposit or savings accounts. Bank employees with necessary licenses also sell mutual fund IRA accounts. The Internal Revenue Service does not penalize people for transferring IRA accounts from one custodian to another as long as funds are reinvested within 60 days. People often move IRAs when CD rates at the custodian bank become uncompetitive. An IRA rollover involves the account holder physically transferring funds whereas an IRA transfer occurs when custodians exchange funds directly.
Go to the bank to which you wish to move the IRA account. Speak to a customer service representative and ask him to set up a IRA account in your name. Provide your name, address, phone number, ID and any other information he requests. Sign the paperwork that pertains to the account. Decide what kind of investment you wish to stow the IRA funds in and tell the representative when you expect to return with the proceeds.
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Go to the bank holding the IRA account. Ask a representative to close the account and have a check made payable to the new bank, for your benefit. Ensure that the representative completes the IRA distribution form correctly to show that the funds are being transferred and not withdrawn. Request a copy of the IRA distribution form.
Return to the new custodian bank within 60 days. Give the check to the representative and instruct them to invest the money into the product of your choice. Request a receipt and any other paperwork that the transaction generates such as a CD agreement.
Some banks will contact custodian banks directly to request the rollover of IRA funds but it usually takes a few weeks for proceeds to be transferred and the rates on CDs may not be as high when the funds arrive. When offered a high rate on a CD IRA, it is best to withdraw the funds in person and open the new account on the same day.
During an IRA transfer, if the custodian bank makes the disbursement check payable to the account holder, the IRS requires them to withhold 20 percent for taxes. The tax money can be recouped, but in the short term it requires the account holder to replace the funds out of pocket and wait to get an IRS refund at the end of the tax year.
The IRS compels people over the age of 70 1/2 to take Required Minimum Distributions from traditional IRA accounts every year. When transferring funds check the status of the RMD for the year and let the new bank know whether it or not it has already been processed.
Things You'll Need
IRA account information
State issued identification or a passport.