Warning: Moving PenFed IRAs Can Be Dangerous

[kaneohe]

I am fleeing PenFed as the IRA CDs mature due to their low rates. The initial 2 transfers were uneventful. For some reason on the second round of transfers PenFed sent me letters telling me what was going to happen. They didn't do that the first time but I'm glad they did. The third transfer sounds like it would be fine. However number 4 would be transferred 2 days before maturity which was not what I requested. In addition to that shocker, number 4 was a Roth which would be put in the TIRA rollover acct and transferred from there.
.........so in addition to an early withdrawal penalty, I would be taxed again on the Roth when I withdrew funds from the now TIRA.

I called destination bank B to confirm what their instructions to PenFed had been. Fortunately they were correct. If they had been in error, I could have been guilty since I provided bank B w/ the instructions so I breathed a sigh of relief.

PenFed IRA dept was not available so I need to call them tomorrow to find out if the confirming letter was in error or if they actually think the transfer should be as reflected in the letter.

Moral of the story: Be sure to get written confirmation of the impending transaction so that you can act, if necessary, before it happens.

 

[SecondCor521]

Somewhat unrelated, but my son had a similar administrative error with Schwab - I believe it was a recharacterization of an IRA contribution last year. In my son's case, the transaction happened before we caught the error.

What I was worried about was that since the transaction had happened, we were screwed from a tax perspective and had to live with the consequences. We talked with Schwab, and I was glad to find out that I had worried for nothing. They have a way of administratively fixing errors of that type and are able to do the reporting as though everything was done correctly the first time.

Maybe PenFed and bank B have similar procedures. (Hopefully they just get it straightened out ahead of time, of course.)

 

[RetireBy90]

When I moved IRAs from Penfed I waited till the CDs were matured then moved cash from IRA to Fidelity. No issues with that.

 

[kaneohe]

When I moved IRAs from Penfed I waited till the CDs were matured then moved cash from IRA to Fidelity. No issues with that.

how did you move the cash?

 

[cathy63]

Somewhat unrelated, but my son had a similar administrative error with Schwab - I believe it was a recharacterization of an IRA contribution last year. In my son's case, the transaction happened before we caught the error.

What I was worried about was that since the transaction had happened, we were screwed from a tax perspective and had to live with the consequences. We talked with Schwab, and I was glad to find out that I had worried for nothing. They have a way of administratively fixing errors of that type and are able to do the reporting as though everything was done correctly the first time.

Maybe PenFed and bank B have similar procedures. (Hopefully they just get it straightened out ahead of time, of course.)

I think there's a standard process for fixing bank errors. I had a 401K rolled over to Wells Fargo and it went into my Roth IRA account instead of my tIRA. I didn't know about it until I got the next statement, but when I called, it was an easy fix. They were able to move the initial amount and the associated gains to the correct account, and I only got one 1099-R which was propertly coded.

 

[kaneohe]

.................................

PenFed IRA dept was not available so I need to call them tomorrow to find out if the confirming letter was in error or if they actually think the transfer should be as reflected in the letter.

Moral of the story: Be sure to get written confirmation of the impending transaction so that you can act, if necessary, before it happens.

not so sure the advice above is good anymore......perhaps it is: ignorance is bliss. Contacted the IRA dept today. Apparently all the instructions and dates are correct. Just the letter informing me what they were going to do is wrong and conflicts w/ what the real plans are. Hopefully that is true ....crossing fingers.

 

[ShokWaveRider]

We move about $3m from PenFed over the last 3 years and never had an issue. We simply set up an ACH for the Taxable, and filled out their forms and emailed it to them for IRAs, got email confirmation same day. Other than the IRA checks taking about 8 business day to arrive it was all good.

 

[jazz4cash]

Oh yeah. You know your good when you have verbal confirmation that conflicts with written confirmation.

Seriously I think it could’ve just as well been another institution. For some reason moving IRA funds is usually an adventure for me.

 

[ShokWaveRider]

Why I loved PenFed (No longer with them as their rates suck) was the fact you never had to speak to anyone, just do everything via email.

 

[kaneohe]

Oh yeah. You know your good when you have verbal confirmation that conflicts with written confirmation.

Seriously I think it could’ve just as well been another institution. For some reason moving IRA funds is usually an adventure for me.

feeling better now.........the rep I spoke to today got the letter writer's name and promised to try to make contact. A short time ago I got an e-mail from the letter writer apologizing for the errors that the "system" made. So hopefully now the verbal and the written agree and are correct.

Moving IRAs is kind of like herding ducks across the street. Did bank A get my instructions, did bank A send instructions to bank B, did bank B receive them, did bank B send the funds upon maturity, did bank A get them and put them in the right place. Small database but feels like a wk+ of no interest so it would be nice if PenFed would get their rates up so I could stay put.

 

[cathy63]

... I got an e-mail from the letter writer apologizing for the errors that the "system" made...

I think this is a case where it would be better to hear that these were "human" errors, not "system" errors.