I Need To Change My IRA Company, Where Do I Begin?
Ideally, the company that is your first
choice for your IRA will manage all of it. Over time, you’ll become a little
like friends, with you learning to trust them. and the company appreciating you
as a client and looking out for your best interests.
That’s not always the case.
Sometimes, for one reason or
another, we need to switch IRA companies. This could be due to simpler things,
such as moving to another state, or due to deeper problems between you and your
provider. Regardless, you need a new company and don’t know where to start. In
that case, we’re here to help.
First: You can’t just take your money and go
IRAs are structured in a
particular way. The money you put in your IRA generally isn’t taxed as earnings,
instead of being tax-free until you withdraw it.
If you withdraw your money and
investments from your IRA, the IRS will receive a report on that – and you’ll
be taxed. Even if you immediately put it into another IRA. As such, the first
thing you have to do is not to follow your instinct and ask your current company
to give you everything. Instead, go through proper, established channels.
Second: Choose your new company
Since you can’t be in possession
of your savings without risking getting taxed for them before you close your
old account you need to open a new one. And in order to open a new one, you
have to do your homework and look into companies.
Don’t just jump with the first
one you see. Actually, look into them – what they offer, how they offer it, and
their track record. Everything matters.
Once you have chosen the company,
open the new IRA and ask them about transferring your savings from your old IRA
to the new one. In some cases, there will be paperwork to fill, and they’ll
inform you about the steps.
Third: Arrange the move
You should never be in physical
possession of your IRA savings during the process. A move should ideally happen
directly between custodians, which in this case means company to company.
Thanks to electronic banking, such moves can be automatically done these days,
and in many cases, you’ll only need to provide the new custodian’s data.
Make sure your old custodian is
transferring everything – get a document stating just how much is in your IRA,
both in money and other savings, before the transfer takes place. Also, inform
yourself on any fees the move might incur.
In some cases, IRA providers will
make the transfer via check. In those cases you might be asked to deliver the
check to the new provider yourself, or even deposit it yourself into your new IRA
account.
You’re allowed to do this as long as you do it in no more than two
weeks, and as long as the check is issued to the new custodian and not to you
personally.
Fourth: Wait for the transfer
Since IRA providers are in
contact with the IRS, you don’t need to contact the IRS yourself. Once your
holdings appear in your new account, you can feel free to close the old one and
go on with your life.
At this point, the process has been completed, and you
have successfully moved your savings into a new account.
Conclusion
Following the processes above is the way to go in order to ensure that you change your IRA company without tears.
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