Roth IRA transfers, indirect rollovers, contributions, oh my!

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benevo
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Joined: Wed Apr 05, 2017 7:21 am

Roth IRA transfers, indirect rollovers, contributions, oh my!

Postby benevo » Wed Apr 19, 2017 11:06 am

Hi gang!

I'm moving my roth IRA from Ameriprise to Vanguard. I initiated the automated transfer, but Ameriprise requires a medallion guarantee and as the majority of my banking is online, it is a hassle to get that signed.

So, to circumvent this option, and because my current Ameriprise roth IRA is just a cash account, I have requested they withdraw my funds to my personal checking account (which they are currently doing). I will now cancel my transfer request with Vanguard and instead just contribute/directly deposit money from my checking account.

My question: Vanguard said I can do this, OR I can do an "indirect rollover."

I'm not sure I see the benefit of doing this, versus just manually depositing the initial balance. Since none of the roth IRA included investments or gains and was just cash contributions, there's no tax issue either way - am I understanding this correctly?

Thanks!

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Earl Lemongrab
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Re: Roth IRA transfers, indirect rollovers, contributions, oh my!

Postby Earl Lemongrab » Wed Apr 19, 2017 2:40 pm

To clarify, does this Roth just have 2017 contributions? Even if you withdrew earlier ones, you couldn't put them into a new Roth somewhere else unless it's an indirect rollover (you only one in a 12-month period).

Your question is uncomfortably vague.
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benevo
Posts: 45
Joined: Wed Apr 05, 2017 7:21 am

Re: Roth IRA transfers, indirect rollovers, contributions, oh my!

Postby benevo » Wed Apr 19, 2017 2:48 pm

Earl Lemongrab wrote:To clarify, does this Roth just have 2017 contributions? Even if you withdrew earlier ones, you couldn't put them into a new Roth somewhere else unless it's an indirect rollover (you only one in a 12-month period).

Your question is uncomfortably vague.


Apologies!

It was an account established in late 2015 and last contribution was early 2016. So, no 2017 contributions at all - and I think only 1 2016 contribution (most in 2015). Just cash, no investment dividends.

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Earl Lemongrab
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Re: Roth IRA transfers, indirect rollovers, contributions, oh my!

Postby Earl Lemongrab » Wed Apr 19, 2017 2:51 pm

benevo wrote:
Earl Lemongrab wrote:To clarify, does this Roth just have 2017 contributions? Even if you withdrew earlier ones, you couldn't put them into a new Roth somewhere else unless it's an indirect rollover (you only one in a 12-month period).

Your question is uncomfortably vague.


Apologies!

It was an account established in late 2015 and last contribution was early 2016. So, no 2017 contributions at all - and I think only 1 2016 contribution (most in 2015). Just cash, no investment dividends.

In that case, your only options are to do a direct custodian transfer, which you tried ran into a roadblock, or an indirect rollover. Otherwise, if you take the money out you've lost the Roth space forever, and might owe some tax on any gains.

Follow Vanguard's lead on how to do that.
This week's fortune cookie: "You will enjoy doing something spontaneous this weekend." Apparently that meant working on a dead PC, but I didn't enjoy that much.

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BL
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Re: Roth IRA transfers, indirect rollovers, contributions, oh my!

Postby BL » Wed Apr 19, 2017 2:58 pm

https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions

60-day rollover – If a distribution from an IRA or a retirement plan is paid directly to you, you can deposit all or a portion of it in an IRA or a retirement plan within 60 days. Taxes will be withheld from a distribution from a retirement plan (see below), so you’ll have to use other funds to roll over the full amount of the distribution.


Don't miss that 60-day deadline and allow some room for error.

benevo
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Joined: Wed Apr 05, 2017 7:21 am

Re: Roth IRA transfers, indirect rollovers, contributions, oh my!

Postby benevo » Thu Apr 20, 2017 1:34 pm

Earl Lemongrab wrote:In that case, your only options are to do a direct custodian transfer, which you tried ran into a roadblock, or an indirect rollover. Otherwise, if you take the money out you've lost the Roth space forever, and might owe some tax on any gains.

Follow Vanguard's lead on how to do that.


What do you mean by losing the Roth space? I'm of the understanding that I can withdraw contributions I made to my Roth IRA anytime, tax- and penalty-free (as long as they aren't EARNINGS on my Roth IRA). Can't I just add these initial contributions to a new roth IRA account?

Sorry if this is a dumb question. Thanks!

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Earl Lemongrab
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Re: Roth IRA transfers, indirect rollovers, contributions, oh my!

Postby Earl Lemongrab » Thu Apr 20, 2017 1:41 pm

benevo wrote:
Earl Lemongrab wrote:In that case, your only options are to do a direct custodian transfer, which you tried ran into a roadblock, or an indirect rollover. Otherwise, if you take the money out you've lost the Roth space forever, and might owe some tax on any gains.

Follow Vanguard's lead on how to do that.


What do you mean by losing the Roth space? I'm of the understanding that I can withdraw contributions I made to my Roth IRA anytime, tax- and penalty-free (as long as they aren't EARNINGS on my Roth IRA). Can't I just add these initial contributions to a new roth IRA account?

There seems to be some definition gap. The bit about withdrawing penalty-free doesn't apply. If you take money out of an IRA, Roth or TIRA, then you have 60 days to put it into an IRA or similar account or it's a permanent withdrawal. If you do redeposit, it's an indirect rollover. That's what Vanguard is telling you to do.

Edit: In the case of a Roth IRA, the only type account you could deposit it into would be another Roth IRA, so this would come under the "one rollover" rule. TIRAs have other choices.
This week's fortune cookie: "You will enjoy doing something spontaneous this weekend." Apparently that meant working on a dead PC, but I didn't enjoy that much.

benevo
Posts: 45
Joined: Wed Apr 05, 2017 7:21 am

Re: Roth IRA transfers, indirect rollovers, contributions, oh my!

Postby benevo » Thu Apr 20, 2017 3:11 pm

Earl Lemongrab wrote:There seems to be some definition gap. The bit about withdrawing penalty-free doesn't apply. If you take money out of an IRA, Roth or TIRA, then you have 60 days to put it into an IRA or similar account or it's a permanent withdrawal. If you do redeposit, it's an indirect rollover. That's what Vanguard is telling you to do.

Edit: In the case of a Roth IRA, the only type account you could deposit it into would be another Roth IRA, so this would come under the "one rollover" rule. TIRAs have other choices.


Thank you! This is very helpful as I'm understanding all of this. :)


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