Transfer AXA Traditional IRA to Schwab Roth IRA or withdraw and deposit?

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Topic Author
beernutz
Posts: 27
Joined: Sun May 31, 2015 12:50 pm

Transfer AXA Traditional IRA to Schwab Roth IRA or withdraw and deposit?

Post by beernutz » Tue Jan 14, 2020 9:52 pm

I have about $9,500 in an AXA/Equitable Traditional IRA I'd like to transfer to a Schwab Roth Contributory IRA I recently opened mainly for consolidation of account purposes.

I put $2750 money in the AXA IRA back in 1992 which I'd originally earned during my first post-college job in the late 80s. I've had almost zero interactions with AXA in the 28 years since then and made no subsequent contributions but recently when I decided to do the transfer/conversion to a Roth IRA I called their local office which handles my account and they were unhelpful.

Eventually I spoke with an AXA/Equitable CS person who pointed me to an online transfer form pdf which has a section that apparently a "Certifying Officer" at Schwab has to complete and sign. It is labeled:
3. Acceptance of Transfer, Rollover or Exchange To be completed by new carrier or successor fiduciary

I could get my local Schwab contact to complete this but it seems like a PITA as that office is about a 45 minute drive so I was considering just withdrawing the IRA from AXA since I'm almost 61 and taking the proceeds and adding them to my Schwab Roth up to my $7,000 limit.

Is there a downside to withdrawing the IRA and depositing it in the Roth as opposed to doing an organization to organization direct transfer I'm not considering?
Last edited by beernutz on Tue Jan 14, 2020 10:06 pm, edited 1 time in total.

shess
Posts: 372
Joined: Wed May 17, 2017 12:02 am

Re: Transfer AXA Traditional IRA to Schwab Roth IRA or withdraw and deposit?

Post by shess » Tue Jan 14, 2020 10:05 pm

beernutz wrote:
Tue Jan 14, 2020 9:52 pm
Is there a downside to withdrawing the IRA and depositing it in the Roth as opposed to doing an organization to organization direct transfer I'm not considering?
You should avoid taking possession of the money by withdrawing it, because then you owe taxes on it. IRA transfers are not that complicated. Usually your best bet is to start at the target facility, and see what kinds of support they have for moving accounts - they generally have more incentive to make it easy for you, so you might find that you can ask their support people for hints on how to surmount any bumps that come up.

This is 2020, you definitely shouldn't need to physically drive to anyone's location for an IRA with $10k in it.

Topic Author
beernutz
Posts: 27
Joined: Sun May 31, 2015 12:50 pm

Re: Transfer AXA Traditional IRA to Schwab Roth IRA or withdraw and deposit?

Post by beernutz » Tue Jan 14, 2020 10:16 pm

shess wrote:
Tue Jan 14, 2020 10:05 pm
beernutz wrote:
Tue Jan 14, 2020 9:52 pm
Is there a downside to withdrawing the IRA and depositing it in the Roth as opposed to doing an organization to organization direct transfer I'm not considering?
You should avoid taking possession of the money by withdrawing it, because then you owe taxes on it. IRA transfers are not that complicated. Usually your best bet is to start at the target facility, and see what kinds of support they have for moving accounts - they generally have more incentive to make it easy for you, so you might find that you can ask their support people for hints on how to surmount any bumps that come up.

This is 2020, you definitely shouldn't need to physically drive to anyone's location for an IRA with $10k in it.
Thanks for the suggestions. I certainly agree about not wanting to drive but the AXA form requires a signature from someone at Schwab and it isn't a savable fill-in pdf form. I will call Schwab and see what help they provide but the AXA form contains this declaimer in the section to be completed by Schwab: NOTE: This is the only form that AXA Equitable will accept for direct rollover or direct transfer requests

It was my understanding that if I transfer from a TIRA to a RIRA I have to pay taxes on the converted amount.

Jablean
Posts: 461
Joined: Sat Jun 02, 2018 2:38 pm

Re: Transfer AXA Traditional IRA to Schwab Roth IRA or withdraw and deposit?

Post by Jablean » Tue Jan 14, 2020 10:38 pm

Well you are of age to take it out without penalty. If you plan on converting it to Roth then yes you'll owe regular income taxes on it. So yes, sometimes in person works fine.

However since you are doing a conversion then your yearly contribution amount has no bearing on it. You can put in your full Roth amount as well as the rollover amount.

Adding - Are you sure this is a regular IRA? They seem to be insurance - is it in an annuity?

Topic Author
beernutz
Posts: 27
Joined: Sun May 31, 2015 12:50 pm

Re: Transfer AXA Traditional IRA to Schwab Roth IRA or withdraw and deposit?

Post by beernutz » Tue Jan 14, 2020 11:46 pm

Jablean wrote:
Tue Jan 14, 2020 10:38 pm
Well you are of age to take it out without penalty. If you plan on converting it to Roth then yes you'll owe regular income taxes on it. So yes, sometimes in person works fine.

However since you are doing a conversion then your yearly contribution amount has no bearing on it. You can put in your full Roth amount as well as the rollover amount.

Adding - Are you sure this is a regular IRA? They seem to be insurance - is it in an annuity?
It is a variable annuity IRA invested in series 100 multimanager aggressive equities.

shess
Posts: 372
Joined: Wed May 17, 2017 12:02 am

Re: Transfer AXA Traditional IRA to Schwab Roth IRA or withdraw and deposit?

Post by shess » Wed Jan 15, 2020 12:00 am

beernutz wrote:
Tue Jan 14, 2020 10:16 pm
shess wrote:
Tue Jan 14, 2020 10:05 pm
beernutz wrote:
Tue Jan 14, 2020 9:52 pm
Is there a downside to withdrawing the IRA and depositing it in the Roth as opposed to doing an organization to organization direct transfer I'm not considering?
You should avoid taking possession of the money by withdrawing it, because then you owe taxes on it. IRA transfers are not that complicated. Usually your best bet is to start at the target facility, and see what kinds of support they have for moving accounts - they generally have more incentive to make it easy for you, so you might find that you can ask their support people for hints on how to surmount any bumps that come up.

This is 2020, you definitely shouldn't need to physically drive to anyone's location for an IRA with $10k in it.
Thanks for the suggestions. I certainly agree about not wanting to drive but the AXA form requires a signature from someone at Schwab and it isn't a savable fill-in pdf form. I will call Schwab and see what help they provide but the AXA form contains this declaimer in the section to be completed by Schwab: NOTE: This is the only form that AXA Equitable will accept for direct rollover or direct transfer requests

It was my understanding that if I transfer from a TIRA to a RIRA I have to pay taxes on the converted amount.
Even then, you can probably mail it, and they can mail it back signed.

I think the rules on rollovers fall into two bins. The best case is where you get the check made out something like "Schwab as trustee of IRA of John Q. Smith" - when I say "something like", what I really mean is "Check with Schwab", but the gist of it is that it's not made out to you directly. I think this is called a "direct rollover", and is cleanest all around.

An "indirect rollover" is when the IRA cuts you a check directly, and you have 60 days to deposit those funds in the new IRA. BUT, the original IRA will withhold taxes, and to do it "right", you need to deposit the full original amount. You'll get the taxes back at tax filing. If you deposit only the net amount they gave you, the rest is considered taxable, in which case you won't get the full withheld amount of taxes back.

For a $10k account, I'd consider doing this indirect rollover, because it sounds easier when your vendor isn't working with you. The IRS link below seems pretty clear. Basically, it sounds like you'd get a check for $8k ($10k-$2k), and as long as you deposit $10k in the other account w/in 60 days, you will get the full $2k back at tax time (which maybe argues for doing this later in the year).

https://www.investopedia.com/ask/answer ... al-ira.asp
https://www.irs.gov/retirement-plans/pl ... tributions

Topic Author
beernutz
Posts: 27
Joined: Sun May 31, 2015 12:50 pm

Re: Transfer AXA Traditional IRA to Schwab Roth IRA or withdraw and deposit?

Post by beernutz » Wed Jan 15, 2020 6:20 pm

shess wrote:
Wed Jan 15, 2020 12:00 am
beernutz wrote:
Tue Jan 14, 2020 10:16 pm
shess wrote:
Tue Jan 14, 2020 10:05 pm
beernutz wrote:
Tue Jan 14, 2020 9:52 pm
Is there a downside to withdrawing the IRA and depositing it in the Roth as opposed to doing an organization to organization direct transfer I'm not considering?
You should avoid taking possession of the money by withdrawing it, because then you owe taxes on it. IRA transfers are not that complicated. Usually your best bet is to start at the target facility, and see what kinds of support they have for moving accounts - they generally have more incentive to make it easy for you, so you might find that you can ask their support people for hints on how to surmount any bumps that come up.

This is 2020, you definitely shouldn't need to physically drive to anyone's location for an IRA with $10k in it.
Thanks for the suggestions. I certainly agree about not wanting to drive but the AXA form requires a signature from someone at Schwab and it isn't a savable fill-in pdf form. I will call Schwab and see what help they provide but the AXA form contains this declaimer in the section to be completed by Schwab: NOTE: This is the only form that AXA Equitable will accept for direct rollover or direct transfer requests

It was my understanding that if I transfer from a TIRA to a RIRA I have to pay taxes on the converted amount.
Even then, you can probably mail it, and they can mail it back signed.

I think the rules on rollovers fall into two bins. The best case is where you get the check made out something like "Schwab as trustee of IRA of John Q. Smith" - when I say "something like", what I really mean is "Check with Schwab", but the gist of it is that it's not made out to you directly. I think this is called a "direct rollover", and is cleanest all around.

An "indirect rollover" is when the IRA cuts you a check directly, and you have 60 days to deposit those funds in the new IRA. BUT, the original IRA will withhold taxes, and to do it "right", you need to deposit the full original amount. You'll get the taxes back at tax filing. If you deposit only the net amount they gave you, the rest is considered taxable, in which case you won't get the full withheld amount of taxes back.

For a $10k account, I'd consider doing this indirect rollover, because it sounds easier when your vendor isn't working with you. The IRS link below seems pretty clear. Basically, it sounds like you'd get a check for $8k ($10k-$2k), and as long as you deposit $10k in the other account w/in 60 days, you will get the full $2k back at tax time (which maybe argues for doing this later in the year).

https://www.investopedia.com/ask/answer ... al-ira.asp
https://www.irs.gov/retirement-plans/pl ... tributions
I appreciate you taking the time to write that. I am following up with my Schwab managed account contact.

shess
Posts: 372
Joined: Wed May 17, 2017 12:02 am

Re: Transfer AXA Traditional IRA to Schwab Roth IRA or withdraw and deposit?

Post by shess » Wed Jan 15, 2020 9:03 pm

beernutz wrote:
Wed Jan 15, 2020 6:20 pm
I appreciate you taking the time to write that. I am following up with my Schwab managed account contact.
I would DEFINITELY run it past your Schwab rep, to make sure you get it right. I've only ever done direct rollovers...

Though I suppose the account is of a size and you're at an age where getting it wrong won't be all that bad. It's not like you'll end up paying $50k in early-withdrawal penalties!

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