60 Day IRA Rollover Question - just prior to 59 1/2

[Da Nag]

We have several IRAs with funds available next summer, but could really use some of the funds in late spring for major home projects we need to get going on.

I know about 60 day rollovers, having used them a few years back. However, at that time - when the funds were put back into the IRA, we were still younger than 59 1/2. Very straightforward, clear rules.

The scenario I'm wondering about: Say we pull the funds from one IRA next spring when one of us is roughly 59 and 4 months. Is an IRA rollover still allowed if the 60th day is beyond 59 1/2? If so, we could "pay it back" from the other IRA, as those funds would be available at 59 1/2.

And, if such a shell game is allowed - presumably the funds returned via the IRA rollover could be pulled again as soon as they showed up, as you would be past 59 1/2.

 

[njhowie]

There are no age limitations on IRA rollovers.

Your shell game should work.

 

[kaneohe]

The rules were changed a few yrs ago so you can now do only 1 60 day rollover every 12 months. Violation of this rule means the forbidden transaction is taxable and must be removed from the IRA.

"IRA one-rollover-per-year rule
.................................
Beginning after January 1, 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own."

https://www.irs.gov/retirement-plan...vers-of-retirement-plan-and-ira-distributions

 

[njhowie]

The rules were changed a few yrs ago so you can now do only 1 60 day rollover every 12 months. Violation of this rule means the forbidden transaction is taxable and must be removed from the IRA.

"IRA one-rollover-per-year rule
.................................
Beginning after January 1, 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own."

https://www.irs.gov/retirement-plan...vers-of-retirement-plan-and-ira-distributions

However, if one were his (hers) and other was spouse's...

 

[kaneohe]

However, if one were his (hers) and other was spouse's...

Trying to figure out how that helps.......could you provide more detail?

 

[njhowie]

Sure, the IRS rules you linked to indicate that an individual can only do one non-"trustee to trustee" rollover (i.e. doing a cashout and redepositing on your own).

However, if the IRAs are for two different individuals, he/she could take the money in hand from each - it would only be one rollover for each person and within the restrictions of the rules you indicate.

But, even then, if he/she were rolling over both, he'd/she'd need to redeposit the full amounts of each in the new rollover IRAs. Or on the second, since spouse is over 59 1/2, just count it as a withdrawal and there wouldn't be any penalty.

In any case, it seemed to me that it was just a temporary cash flow issue and his/her plan for getting around the rules/limitations would work.

 

[kaneohe]

The OP talked about a shell game.......I had the impression to keep doing it forever......didn't see how that would work.

so OP's purpose is just do do an early w/d w/o paying the early w/d penalty? 1x only.

How old is the other party? If over 59.5, why not just take the funds from there?

 

[njhowie]

The OP talked about a shell game.......I had the impression to keep doing it forever......didn't see how that would work.

Agreed - can't work indefinitely.

I was under the impression it was just to get around this timing issue of reaching 59 1/2.

 

[Da Nag]

The OP talked about a shell game.......I had the impression to keep doing it forever......didn't see how that would work.

Nope - just temporary cash flow as mentioned earlier.

Three years back we did something similar when building a home and it worked out well. We had adequate cash to do most of it, and got about 80-85% through before running out of money. Given the expenses and limitations of a construction loan, we did the following to complete it:

- 60 day rollover withdrawal from IRA #1 (mine) to fund construction completion
- 60 day rollover from IRA #2 (spouses), pay back IRA #1 58 days later
- Take out conventional home loan w/cash back to pay back IRA #2