|
 |
Home >> Accounts >> Retirement Accounts
Does it Cost to Make IRA Transfers?
I have a significant amount of money in an IRA account. I was told if I tranfer this money to a Roth IRA, it will grow tax free, thus it will also be spent tax free in retirement. I called up the bank to make arrangment to have the money rollover to a Roth IRA at the maturity of the regular IRA. They told me I will have to pay a bank fee for the transaction plus a 10% tax. Is this information correct?
|
|
 There are a number of differences between traditional and Roth IRAs, and taxation timing is a significant one. If your current IRA is mostly tax-deferred -- that is, your contributions to the IRA were pre-tax -- you will be taxed on the amount of your transfer to the Roth IRA (because Roth IRAs are funded with post-tax funds and are not taxed later, during retirement). So your decision to transfer to a Roth IRA needs to be made with an understanding of the IRS's "you pay us now or you pay us later" approach. In general, if your income during retirement will be the same as or less than your income now, you're probably better off not moving funds from your IRA to a Roth IRA.
As for the bank's suggestion that you'd have to pay a 10% tax for rolling the funds into the Roth IRA, in addition to the income tax on the rollover, we can't find any basis for that statement, as long as you handle the rollover properly and complete it within 60 days. The mechanics of the rollover can be taken care of by the Roth IRA custodian, if you decide to make the move. Finally, there is the matter of the bank's fee. That's up to the bank, and it's likely there will be one if they have said so.
Making a switch like this is not a matter you should take lightly. Check out the tax implications and other pros and cons carefully with retirement account professionals before you do anything.
Published on BankingQuestions.com 8/12/08
|
| |
|
Accounts
Article
Q&A
Podcast
Video
Blog
Discussions
PDF
Powerpoint
