Can I return funds to my Traditional IRA after taking a distribution?
You may take what is referred to as an IRA Rollover once every 12 months. And yes, you may return the funds to your traditional IRA as long as it is within the 60 day period. Once you have taken possession of your funds you only have 60 days to return the funds, otherwise you will be taxed on the distribution.
If you are under the age of 59.5 then you will also have a 10% early withdrawal penalty unless you qualify for an early withdrawal.*
*The distribution is not subject to the 10% early withdrawal penalty in the following scenarios:
1) After IRA owner reaches 59.5 years of age
2) After death of the IRA owner
3) Total and permanent disability of the IRA owner
4) Qualified higher education expenses
5) First time homebuyers up to $10,000
6) Amount of unreimbursed medical expenses
7) Health insurance premiums paid while unemployed
8) Certain distributions to qualified military reservists called to duty
9) Rollovers: In-plan Roth rollovers or eligible distributions contributed to another retirement plan or IRA within 60 days
10) There is a little known section of the IRS tax code: Section 72t that allows you to take substantially equal periodic payments (SOSEPP) on an annual basis before the age of 59.5 without paying the 10% early withdrawal penalty. The IRS stipulates that you take money out of your IRA for five years or until the age of 59.5, whichever is longer.
Assuming you are not age 70 1/2 or older, the answer is yes, IF:
- You haven't made a rollover from any of your IRAs (including SEP IRAs, SIMPLE IRAs or Roth IRAs) in the past 12-month period.
- You return the full amount of the withdrawal within 60 days of the distribution. -Distributions are normally taxed. So, beware and return the full amount of your withdrawal before-taxes were taken out.
There are lots of rules surrounding IRA One Rollover Per Year. The IRS publications are the best place to find out the rules. But, IRS information is usually really boring and hard to read. Consult the Investopedia article, your tax professional or the IRS' Rollovers of Retirement Plan and IRA Distributions for information specific to your personal situation.
Too, if you qualify, there is a very narrow set of waivers to the 60-day rule. This Investopedia article: Exceptions to the 60-Day Retirement Account Rollover Rule is a very helpful starting place to determine if you might qualify for a waiver.
You may return money to your traditional IRA within 60 days of withdrawing. Not two months. Not 61 days. Sixty days, period. The IRS is a sticker on this point and it's worth noting because taxes will be due for the amount withdrawn, plus penalty is you are younger than 59.5 years. That's a steep tax bite and you'd hate to pay it simply because you miscalculated the deadline.
The good news is you have 60 days to return the money to an IRA after taking a distribution. You can return the funds to the same IRA, or complete an indirect "rollover" and put the funds back into a different IRA.
If you take a distribution from your Traditional IRA, you can roll over the amount to the same Traditional IRA or another Traditional IRA, provided the following requirements are met:
- The rollover is completed within 60 days of receiving the distribution.
- You have not completed an IRA-to-IRA rollover for the IRAs within the 12-months that preceded the date the distribution occurred.
- The amount is rollover eligible. For IRA-to-IRA rollovers, ineligible rollover amounts include amounts representing required minimum distributions .
You are allowed to make tax-free rollovers from your IRAs at any age, but if you are 70.5 or older, you cannot roll over your RMD; this would be considered an excess contribution.
If you are required take RMD each year, be sure to remove the current year's RMD amount from your IRA before implementing the rollover.
Exceptions to the 60-deadline apply only in certain cases. See Exceptions To The 60-Day Rollover Rule.
This question was answered by Denise Appleby.