Rollovers and Conversions

A rollover lets you move retirement funds from one IRA account to another without incurring immediate taxation or penalties. The most common reasons for doing this are moving to a new city, wanting to consolidate several IRAs into one account, or changing to an IRA provider who offers better service, safety or convenience.

There are rules you must follow, however, to ensure that you will not incur penalties or additional taxes when you roll over an IRA:

  • You must deposit the funds into another IRA within 60 days
  • You can roll over funds in any given IRA only once during a 12-month period
  • If you are age 70 or older when you take funds from your IRA, you cannot roll over your minimum required distribution for the year
  • You must document your rollover transaction when you file your federal taxes, even though its not a taxable transaction
Direct Rollovers
At some point, you may receive a distribution from a qualified retirement plan for any of the following reasons:

  • You leave your current employer
  • Your plan is terminated
  • You reach age 59
  • You become totally and permanently disabled
  • You receive ownership of a qualified retirement plan from a former spouse
  • Your spouse dies and you inherit funds
It may be financially beneficial to roll over this distribution into another IRA account. By doing so, you may be able to avoid the 20% withholding requirement and defer taxes on the rolled-over amount. You may roll over all taxable distributions except:

  • Substantially equal payments made systematically over your life expectancy or over a period of 10 years
  • Required minimum distributions made after you reach age 70
  • A return of voluntary after-tax contributions you made to the plan.
You may convert your Traditional IRA to a Roth IRA as long as you follow these special rules:

  • You must complete the rollover within 60 days
  • Any sums that would have been taxable will be treated as income
  • Effective 2010, all taxpayers will be eligible to make conversions to Roth IRAs despite their adjusted gross income
  • You are not eligible to convert to a Roth IRA if you are married but file a separate tax return
  • A separate Roth IRA should be used for the converted IRA amounts, which must be accounted for a period of five years following the rollover
Before you make any changes to your IRA account(s), we encourage you to check with your tax advisor or discuss your retirement needs with one of our financial advisors.

*Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with SchoolsFirst Federal Credit Union to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution.

CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.

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