Did you know that you are able to move or transfer funds from one retirement plan to another, penalty-free? It’s actually quite simple. There are two basic methods to make this happen, and you may choose either one:
- You can have the funds directly transferred from one retirement plan to another. In this case, the money never actually reaches you personally, but is moved from one institution to another automatically. Once the process is initiated, there is little more to do except confirm the transfer.
- If you decide you want to move the money yourself, you have the option to receive a check directly from one retirement plan. Once you receive the funds, it is then up to you to deposit them in a new qualified plan.
If you choose the second method, receiving a check, be aware than you only have 60 days to deposit the check in a new retirement plan. If you fail to act in a timely manner you may be subject to taxes on the distribution as well as a 10% early withdrawal penalty.
However, if you miss the 60 day window due to circumstances beyond your control, such as an error caused by your financial professional, or a personal emergency, you may be eligible for a waiver. IRS.gov has templates for appeal letters in the unlikely event this need would arise.