Understanding the New IRA Rollover Rules

Historically speaking, IRS guidelines have let IRA accountholders withdraw funds from their IRA, with the intent of rolling it into a separate IRA—ultimately with the intention of taking control of those funds, in the process. This long-standing allowance is going to be changed, the rules made significantly more rigorous, in 2015—and the new guidelines could have a substantial effect on your own retirement planning.

The New Rules in a Nutshell

What exactly do the new rules say? They can be boiled down to a basic premise: Where once you could roll over IRA funds with great frequency, you can now do so only once every 365 days.

To put it another way, IRA accountholders shouldn’t make the mistake of thinking that moving their money around is a no-fault transaction, or that there is no penalty. The IRS, in an effort to crack down on loophole exploitations, is ensuring that, from 2015 forward, the regulations concerning IRA rollovers and money-moving are quite stringent.

Implications for Investors

There are some big implications to all of this, the first one is simply that you shouldn’t try to move money around without first talking with your investment advisor. Not only are the rules tightening up next year, but the rules concerning rollovers and money transfers differ from IRAs to 401(k)s—making this a much more complex undertaking than you might think, and something that really requires the guidance of a financial professional.

The next implication, of course, is that anyone planning on taking a distribution from their IRA may wish to do so sooner rather than later. The old rules are still in effect through the end of December, but the more stringent regulations go into place on January 1 of next year.

Finer Points

There’s still plenty that you can do with your IRA, including rolling over an IRA or Roth IRA from one financial institution to another—a simple “trustee to trustee transfer” is permissible as often as you’d like to do it.

Additionally, you can move money from one kind of retirement account to another—say, from an IRA to a 401(k)—without any additional complexities. There are a number of strategic implications to this, though, and it’s something best discussed with your advisor.

What investors can’t do anymore is say they’d like to roll over money, and then simply cut themselves a check; this is what the IRS is not regulating to just a once-yearly function.

This is a seemingly small point that may force big changes to your own financial plans; if you have any questions, we invite you to contact the Stonepath Wealth Management team today. We stand ready to assist you in understanding these important new guidelines.