Roth IRA rollovers question

[Luhar]

I rolled my Roth IRA over from one institution to another less than a year ago. I would like to roll a portion of it over to another institution (to gain access to a wider variety of mutual funds). Publication 590 states that a rollover from one IRA to another is subject to a waiting period. Specifically, on page 23, it states: "Waiting period between rollovers. Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA. You also cannot make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover."

Does the one year waiting period apply when you are rolling one Roth to another Roth? I've never had a traditional IRA and publication 590 makes it sound like the 1-year waiting period only applies when you are rolling funds from a Traditional IRA to a Roth IRA.

Thanks in advance.

 

[pb4uski]

I don't think so, but ask the Roth provider you plan to roll to or from.

 

[kaneohe]

see p. 68-69 here http://www.irs.gov/pub/irs-pdf/p590.pdf

I'm under the impression that the rules for TIRAs generally apply to Roths so
the indirect rollover 12mo. rule would apply also. You can avoid that by doing a direct Trustee to Trustee (or Custodian) transfer. Sometimes they will charge for doing that (or not). Another possible workaround is to direct transfer into another Roth account at the originating institution and do the indirect rolloer from that one (assuming you haven't also done a forbidden transaction from that 2nd account within those 12 mos.

Was the first move from Roth IRA to Roth IRA? If so, the 12 mo rule would apply. If the first move was from a corporate Roth 401K, it might not.......this latter , tho, I'm not so sure about.

 

[Luhar]

Thanks for the help. Yes, the first transfer was from Roth IRA to Roth IRA.

 

[kaneohe]

and it was an indirect rollover where the check was made out to you and then you either endorsed it to the other institution or deposited it in your personal bank account and then wrote another check for the rollover Roth? as opposed to a direct transfer between institutions where you never had the potential to take possession of the funds?

 

[Luhar]

It was actually a direct rollover. Scottrade took the funds directly from Wells Fargo.

 

[sengsational]

It was actually a direct rollover. Scottrade took the funds directly from Wells Fargo.

I can see why the IRS would not want more than one indirect transfer per year since you'd be getting up to 60 days use of that money multiple times. But direct transfers, you don't get use of the money, so logically shouldn't matter. I'd re-read the passages paying close attention to direct vs indirect.

 

[kaneohe]

It was actually a direct rollover. Scottrade took the funds directly from Wells Fargo.

well, now, that makes a slight difference . see p.22 http://www.irs.gov/pub/irs-pdf/p590.pdf

I don't like the term "rollover" when it is handled directly between trustees.
I prefer "transfer" and I believe the link confirms that. I don't know the official definitions but I like to use "rollover" when you are involved in the money transfer. If you get a check made out to you that you could cash if you wanted to, I prefer calling that an indirect rollover. If you get a check made out to the trustee with perhaps some words like "FBO" (for the benefit of you), that you could not cash, I would call that a direct rollover.

I think the 12 mo. rule only applies to indirect rollovers and esp. not direct transfers, so you should be ok even doing an indirect rollover after a direct transfer.

 

[Luhar]

I see. I was confused about the terminology from the beginning. It does appear that there is a very big difference between a rollover and a transfer. What I did was a transfer.

The other confusing part for me is the fact that IRS publication 590 only refers to "traditional" IRA's on page 22 when describing the one-year rule and relationship to transfers. I wonder if I can assume that Roth IRA's fall under the same guidelines? There are links on page 22 that send me to page 24 and 66, where I expected to find the answer to this question, but it still focuses on traditional IRA's or conversions. Maybe I'm missing something.

Thanks for all the help. I really appreciate it. This forum has been been extremely informative.

 

[kaneohe]

My original link for p.68-69 of Pub 590 contains this: ADDED COMMENTS IN CAPS

Rollover From a Roth IRA (ROTH IRA COMMENTS)
You can withdraw, tax free, all or part of the assets from one Roth IRA if you contribute them within 60 days to an- other Roth IRA. Most of the rules for rollovers, described in chapter 1 under Rollover From One IRA Into Another, apply to these rollovers. THE GENERAL RULE THAT CH 1 COMMENTS ABOUT TIRAS APPLY TO ROTHS. IT THEN GOES ON TO LIST A NUMBER OF EXCEPTIONS , OF WHICH I HAVE ONLY LISTED 1 HERE. MORE ON P.69

However, rollovers from retire- ment plans other than Roth IRAs are disregarded for pur- poses of the 1-year waiting period between rollovers.
IT DOES NOT SAY THESE ARE THE ONLY EXCEPTIONS AND I'M SURE A LAWYER COULD POKE HOLES IN THE LANGUAGE BUT FOR US LAYMEN...........
IF YOU CAN DO A DIRECT TRANSFER, IT IS ALWAYS BETTER SINCE YOU DON'T HAVE TO REMEMBER ANY FORBIDDEN WINDOWS OF TIME FOR THE FUTURE BUT IF THERE ARE COSTS INVOLVED YOU MIGHT CONSIDER ALTERNATIVES.