What Can I Roll My IRA Into?

by Mark Kennan

A rollover refers to when you take a distribution from a qualified retirement plan and then deposit into a qualified retirement account. Rollovers can occur only once per account per 12-month period and must be completed within 60 days. Failing to redeposit the money within a 60-day period results in the money being distributed permanently from the account, possibly with accompanying tax consequences.

Another Tax-Deferred IRA

If you are seeking higher returns on your IRA, you may use a rollover to move the money to another tax-deferred IRA. For example, if you currently have your IRA invested in a certificate of deposit but are seeking the higher potential returns of a mutual fund, you may roll your money into an IRA at a different institution that offers a mutual fund in line with your investment goals. Alternatively, if you can, use a rollover to move money into a more conservative IRA.

An Employer Plan

Some employer plans, such as 401k plans or 403b plans, permit you to roll money into them from an IRA. Your employer plan may offer lower fees or special investment accounts that you want to take advantage of by moving more money into it. Check with your employer plan administrator first, as not all IRAs accept IRA rollovers. You cannot roll money from a Roth IRA into any employer plans. The only account you can roll money from a Roth IRA into is another Roth IRA.

A Roth IRA

The IRS permits you to roll money from a traditional IRA to a Roth IRA. When you move money from a traditional IRA to a Roth IRA, you convert it from tax-deferred money to after-tax money. Roth IRAs offer the benefit of tax-free distributions, but you have to pay taxes on the converted amount, so this only benefits you if you expect to pay a lower tax rate on the conversion than you do on withdrawals during retirement. In addition, money rolled over into a Roth IRA is no longer subject to minimum required distributions.

Put It Back in the Same Account

You can elect to roll the money back into the same account if you so desire. IRAs do not allow you to take a loan from the account, but with a rollover you have 60 days before you have to redeposit the money, so you could effectively take a very short-term loan from your IRA by taking the money out and then putting the money back into the same account within 60 days. For example, if you were waiting on your income tax refund but needed the money immediately, you could take the money out of your IRA and use it, then use the money from your tax refund to roll over into the same IRA and avoid any taxes or penalties.

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