By: Jeffrey Dixon, MBA, CISP, SDIP Vice-President of Business Development
Taxable? No. Great news, right?
Moving money from one retirement account to another rarely is a taxable issue. You are only taxed when you take a distribution of funds from a retirement account and the custodian sends the money directly to you.
When funds are sent from one retirement account to another, the IRS is not even notified. This is called a “direct rollover” because funds move directly between custodians. There is no limit to the number of times you can move funds from one retirement account to another account.
With 401k plans (or other company sponsored retirement plans) it’s typical that you must have left employment to be able to complete a rollover. Ask your plan administrator if your company plan allows for an “in-service transfer”.
What type of retirement account should you set up to move the funds to?
First, understand that Self-Directed IRA is a marketing term. It is not a special type of IRA. All IRAs are governed by the same IRS rules. The type of IRA you would set up is based on two issues:
- The tax basis of the funds being sent and
- Whether you are self-employed or not.
Pre-tax funds must go to another pre-tax account. After-tax funds (like Roth) must go to another after-tax account.
uDirect offers three self-employed plans: 1)the Simple IRA 2) the SEP IRA and 3) the Solo 401k. You must be self-employed with your own business to be eligible for these plans. Please discuss your tax situation with your competent tax advisor to determine the best plan type for your business.
Read more about the different types of retirement plans HERE.
Final Thoughts:
uDirect IRA Services, LLC is not a fiduciary and does not render tax, legal, accounting, investment, or other professional advice. If tax, legal, accounting, investment, or other similar expert assistance is required, the services of a competent professional should be sought.
Consulting a tax or legal professional regarding a decision about a retirement account is a very good idea. Contact us if you have questions about this or any Self-Directed IRA related topic. You can reach us at (866) 706-2798 or info@uDirectIRA.com. Get started today by completing an online application HERE.
No information in this article should be considered financial, tax, or legal advice and may not be relied upon as such.
