Is the 60-Day Rollover Rule Dead?


Is The 60-Day IRA Rollover Rule Dead?


It used to be so easy.


You have a CD at a bank that you hold in your IRA. That CD comes due, and you decide you want to move that money to a IRA-CD at another bank. So you go to bank #1 and cash out that IRA-CD, and you take it to bank #2. At bank #2, you open up a new IRA account and deposit the money in a CD at that bank.


This process is called an IRA Rollover. You have 60 days to complete the transaction.


But the IRS quietly changed the rules on you in 2015. Beginning in 2015, they decided that you are only allowed to do one IRA rollover in any 12-month period. If you do more than one, you effectively are cashing out your IRA and you will owe tax on the entire IRA amount. To make things worse, you have no way to fix it.


But wait a minute, you say! You have multiple IRA-CDs at multiple banks. How are you supposed to move IRA money from one bank to another to get the best CD rates?


IRA Transfers


The answer is to do an IRA Transfer. This is a process where your money is electronically moved from one bank directly to another. The IRS says you can do an unlimited number of these each year.


The difference between a Rollover and a Transfer is pretty simple. With a rollover, you personally receive the money and move it from one institution to the next. With a transfer, you do not receive the money. It goes straight from institution to institution.




Believe it or not, many banks are not very good at the transfer process. Many of them are still moving IRAs the old-fashioned way – by doing rollovers. This will get you into trouble!


So how do you fix it?


Don’t use banks to hold your IRAs.


In today’s world, you can easily hold any type of investment in an IRA at a large custodian (like CDs). Fidelity, Schwab, and TD Ameritrade are some of the largest IRA custodians out there. These custodians are fully aware of the IRS rules and are very comfortable transferring IRA money so you don’t get into trouble.


The moral of the story is this. 60-Day IRA Rollovers are frowned on by the IRS. Penalties for violation are severe and you have no remedies to fix a mistake. So don’t do them. Use a custodian, and when moving IRA money, do transfers, and you will be safe.

Centennial Advisors, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. *Guarantees provided by insurance products are backed by the claims-paying ability of the issuing carrier. Investment advisory services are offered through Centennial Advisors, LLC, a Registered Investment Adviser. Insurance products and services are offered and sold through individually licensed and appointed agents in all appropriate jurisdictions.
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