What can I do with a second maturing IRA?
I have two IRAs maturing in 2017. As I understand the tax court interpretation, only one is permitted to rollover. If that is correct, how do I handle the second IRA?
I think you are confusing the IRA receptacle or account with the investments within the IRA itself. IRAs do not mature, but some types of investments, like bonds or even some "products," do. So, when whatever is inside your IRA matures, the proceeds at maturity should go into the IRA and you can invest however you choose.
Regarding the "rollover" question, you can do a direct custodian to custodian (i.e. Schwab to TD Ameritrade, Fidelity to Schwab, or Merrill Lynch to Schwab) as often as you like per year. So you could consolidate your two IRAs (assuming one isn't a Roth & the other a Traditional) together so you only have one account.
But what you are referring to is a 60 day rollover where you take custody of the monies. You can now only do one 60 day rollover in a calendar year. This is where you call the custodian/brokerage firm and ask them to send you the money directly, then you, in turn, have 60 days to forward the proceeds to your new custodian/brokerage firm or the whole thing is taxable. In the 1st example, because you never took "custody" of the money and it was a direct rollover, no notice or paperwork is ever generated to the IRS. In the 2nd example, the 60 day rollover, the brokerage firm that sent you a check will send a 1099R to the IRS saying you took $____ much money out of your IRA and, therefore, the IRS is put on notice. When you "roll" the money into a new brokerage firm, they send a matching "1099R" contribution to the IRS, and it is a "wash."
But because too many people were doing this numerous times per year, essentially getting 60 day free loans all of the time, the IRS a few years ago decided to limit the 60 day rollover rule/allowance to once/year.
Hope this helps and Happy New Year, Dan Stewart CFA®
In regard to the IRS one year rollover rule, there is a distinction made between a 60 day rollover and a direct transfer.
If you distribute an IRA with yourself made out as payee on the check, that is a 60 day rollover. As long as the funds are deposited into a new IRA (or the same IRA) within 60 days, it will qualify as a tax free rollover. If you do more than one of these in a 365 day period, the second rollover will be disqualified, and will be subject to taxes and penalties.
However, if instead the IRA custodian makes a check payable to the new IRA custodian, that is a direct transfer. This can be done more than once per year without tripping the rule.
The best practice here is to simply have the receiving IRA firm complete IRA transfer paperwork and send it to the old IRA firm. Typically, the IRA funds will be transferred directly to the receiving firm without you ever even seeing the check.
I’m not sure about “maturing” in an IRA because most people use mutual funds, ETFs, etc., for their investments in an IRA. Thus, there’s no maturity per se unless you use bonds exclusively. You may email me with specifics.
As for the second part of your question, you can do as many rollovers as you like as long as you do so by the direct transfer, i.e. the trustee-to-trustee transfer. The one you mentioned is if a financial institution directly hands you a check, and you in turn deposit into another IRA at a different financial institution. Best!
A very common misperception with investors is that IRAs are actually a type of investment. They are not investments, but actually a vehicle in which to hold an investment. IRAs or Individual Retirement Accounts are a way for us to save for retirement by putting pre-tax dollars (most of the time) into a vehicle and have tax-deferred growth on any earnings until we're ready to use the funds when we retire. IRAs can be held in a brokerage account, a bank, or a credit union. Banks and Credit Unions have limited investments to offer and concentrate their recommendations mostly on CD's, Treasury bills, or money market accounts. Some banks also offer annuities, but I would not recommend an annuity in an IRA. IRAs are tax-deferred and so are annuities, so why pay the high fees in an annuity to get the same benefit? In addition to high up-front fees in an annuity, they might also have back-end surrender fees if you choose to sell that annuity before a certain number of years. IRAs held in brokerage accounts have much more flexibility and choice of investments. You can invest in all sorts of mutual funds and ETFs (Exchange-Traded Funds) or in individual stocks and bonds.
Your question is a little confusing because you don't specify where your IRAs are held or what type of investments they hold. When you say that you have two IRAs maturing in 2017, my first guess is that they are probably CD's or Certificates of Deposit, that are maturing in 2017. I would also guess that they are held in a bank or credit union, so if you choose to leave those IRAs at the bank, then you'll be limited to CDs, Treasury bills, or money market funds. If neither one of your IRAs is a Rollover, then you can consolidate the two and move them to a brokerage firm, where you'll have a large choice of investment opportunities as I mentioned above. I can't tell you what would be the best investment for you without knowing your personal circumstances, especially your age, time to retirement, and risk tolerance. You can continue to make contributions to a regular IRA and they may or may not be tax-free contributions, depending on your personal circumstances.
An IRA Rollover is used to transfer a 401(k) or 403(b) account when you terminate employment with the company that offered the 401(k) or with the government or educational institution that offered the 403(b). When you quit your job or stop working, you have the choice of moving your retirement fund into an IRA Rollover. If you're younger than 59 1/2 and/or you're not ready to retire, you don't want to take the money out of your 401(k) directly because you'll pay income tax and possibly a penalty as well. By transferring the 401(k) or 403(b) into an IRA Rollover, you can continue to invest the money tax-deferred until you're ready to use it. Keep in mind that you cannot add any additional funds into an IRA Rollover.
I hope this answers your question. However, if you are still unsure, I would advise you to speak to both your banker and a financial advisor to discuss the various options available to you.