IRA Rollover Rules Per Year – What To Pay Attention To?

IRA Rollover Rules

The IRA rollover rules are important if you have an IRA or 401k account, because not understanding these rules completely could be very costly. There are two ways a rollover can occur, and the best rollover IRA method is an indirect transfer. This is allowed as many times as you desire in a single year according to the IRA rollover rules, as long as certain conditions are met. No matter what account type is involved, whether it is a traditional account or one that involves a self directed Roth IRA, as long as the funds are directly transferred from one plan administrator to another there are no limits in place.

An indirect 401k rollover to IRA account is allowed, but there is a strict limit in place and further restrictions once this transfer takes place. The IRA rollover rules allow for one indirect transaction per year, but this is not a calendar year. Instead the year period is a 365 day period following the date of the indirect rollover. This is true whether it is a traditional IRA rollover or a Roth version account. Once you have used the indirect method you can not rollover any funds from that account for one year, even using the direct method.

The IRA rollover rules allow sixty days for an indirect transfer, and if you do not deposit the funds into the new account within this time period then penalties and taxes will apply and can be steep. A traditional 401k rollover to Roth IRA involves the extra step of being a taxable event, because Roth plans are taxed initially instead of on distribution. An important tip to remember is that the IRA rollover rules do not look at a direct transfer, or trustee to trustee transfer, as a rollover unless the account has had an indirect transfer within the previous year.