Changing Brokers

Q: Are there any penalties or taxes for moving an IRA from one broker to another?

A: You have two choices when moving an IRA from one broker to another. Both choices, if done properly, are tax-free and penalty-free. If you choose to do an IRA rollover, you will receive a check for the full balance of your IRA from your former trustee/custodian, and must deposit that money in the new IRA within sixty-days to avoid income taxes and penalties.

With an asset transfer, you have the new custodian (brokerage or mutual fund organization) move the money for you and no check ever passes through your hands. By having the funds transferred directly from your old IRA into your new one, you avoid any chance of missing the sixty-day deadline with its resulting taxes and penalties. That's why we always recommend having your new brokerage handle the transfer for you via an asset transfer. It's easy to do — there's usually just an extra account transfer form to complete and send in with your new account application. The financial institutions handle these regularly and can walk you through the process if you have questions.

• What is an IRA asset transfer (sometimes called a trustee-to-trustee transfer)? 
• What is an IRA rollover? 
• SMI IRAs & 401(k) page

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