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I am 63 and have retired and transferred my retirement plan to a broker, a regular rollover IRA. I assume, I can withdraw some of my money as I need without penalty and of course pay the necessary taxes. However,?

my question is, can I put the money I took out back into my rollover IRA within 60 days?

Apr 25, 2013 by Stephen from Charlottesville, VA in  |  Flag
8 Answers  |  9 Followers
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12 votes
Peter C. Karp Level 20

William,

The short answer is yes. You have to be careful taking monies out of your IRRA or you will trigger income taxes. The way it works is this: You take the money out of your traditional or Roth IRA and then replace the cash (the same amount that you withdrew) within 60 days. If you do these things, the withdrawal of IRA money and subsequent redeposit is treated as a tax-free rollover transaction -- even though it's effectively the same as taking out and repaying a short-term loan from your IRA. Here are a few things to watch out for: The money you've withdrawn (borrowed) must be redeposit back into an IRA within 60 days. Otherwise, the withdrawal is treated as a taxable distribution, and you can't put the money back into your account. Also, you may owe state income tax, too. So avoid unnecessary stress by re-depositing the money with at least a day or two to spare. Just so you know, the 60-day period starts on the day after you receive the withdrawal (the borrowed amount). You must report the entire amount of any IRA withdrawal on line 15a of your Form 1040 for the year of the withdrawal. If you then re-deposit the amount tax-free you enter a taxable amount of zero on line 15b. Write Rollover next to line 15b. Now the IRS has been properly notified about your tax-free short-term IRA loan deal. Please confirm and consult with your CPA, we are not tax advisors. Given the potential tax traps, you may want to look for other alternatives before using this strategy to solve short-term cash flow problems. But done right, you won’t find a better deal. If you have additional questions please call Karp Capital for other financing and financial planning strategies.

Disclosure: The posted information is for informational purposes only. This message does not constitute an offer to sell or a solicitation of an offer to buy any security. All opinions and estimates constitute Karp Capital's judgment as of the date of the report and are subject to change without notice. Accordingly, no representation or warranty, expressed or otherwise, is made to, and no reliance should be placed on, the fairness, accuracy, completeness or timeliness of the information contained herein. Securities offered through Financial Telesis Inc., member SIPC/FINRA. Financial Telesis Inc. and Karp Capital Management are not affiliated companies.

Comment   |  Flag   |  May 02, 2013 from San Francisco, CA

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10 votes

Hi William,

The short answer is that yes, unless there are specific investments that have surrender charges within your IRA, the IRA itself should impose no penalty for you to take money out. Additionally you can perform one "60 day rollover" on an annual basis. So, without knowing a great deal of specifics of caveats - the general broad brush answer to your question is yes, you should be able to re-deposit any monies you took out of your IRA without any taxes. If taxes were withheld, you'll likely have to file your tax return to get those back, however.

Jon Castle http://www.WealthGuards.com

View all 6 Comments   |  Flag   |  Apr 25, 2013 from Jacksonville, FL
Stephen

You are right, I am doing it on my own through Interactive Brokers a discount Firm. I am afraid I have already made some mistakes. I guess I just thought as long as I paid taxes on the withdrawals now or at the end of the year, It wouldn't matter how many withdrawals I made. I realize now that I shouldnt' be using it like a checking account. Regarding your comment on new IRA's, this would be only if I wanted to tax shelter the money I took out, right? and if so, would I have to open a new IRA for each withdrawal? The last question is, I wont get penalized for these withdrawals will I ? Thanks again

Flag |  Apr 25, 2013 near Charlottesville, VA
Rich Winer

You won't be penalized for any withdrawals because you are over age 59 1/2, but you will have to pay taxes on whatever is not rolled back into an IRA. My point was that if you want to return any part of your withdrawals to your IRA as a rollover (within 60 days), if you return it to the same IRA, you would not be permitted to do another rollover from that IRA this year. However, if you open a new (or second) IRA account, you could return/rollover the money to that account and do another rollover from that account in the current year. However, I'm not sure why you would want to do that as your IRA should not be treated like a checking account. Depending on how long your money has been in cash, you may have missed a nice move in the market, The ads for discount brokers and do it yourself advisory services don't mention the plethora of potential mistakes one can make when doing investing and financial planning on your own. The cost of potential mistakes and oversights can far outweigh what you might think you are saving by not working with a financial advisor.

Flag |  Apr 25, 2013 near Woodland Hills, CA

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8 votes
Jason Hull Level 20

Hi William - fellow Hoo here!

You're over the age of 59 1/2, so you're good to go. The only restriction is that you can't withdraw earnings (e.g. your profit) from a Roth within a 5 year period of when you contributed the funds which led to those earnings.

With regards to the question about the 60 day rule - you have to put the rolled over funds into the IRA within 60 days or the IRS will treat it as ordinary income.

View all 5 Comments   |  Flag   |  Apr 25, 2013 from Fort Worth, TX
Rich Winer

I attended UVA for one year back in 1978-79, before leaving for points unknown. Charlottesville is such a wonderful place.

1 like | 
Flag |  Apr 25, 2013 near Woodland Hills, CA
Jason Hull

William - I saw you answer that you're all in cash and working with a broker. Make double darn sure that you get him to sign a fiduciary oath before he works with you in case he decides that you "need" some front loaded mutual fund which will help him get to retirement faster than you. I don't trust commissioned brokers farther than I can throw them, so if they're over 225#, I can't get 'em off my chest! http://www.hullfinancialplanning.com/why-is-fiduciary-responsibility-paramount/

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Flag |  Apr 25, 2013 near Fort Worth, TX

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7 votes

According to the IRS website:

If the distribution from the qualified plan or IRA is paid to you, you have 60 days from the date of receipt to roll it over to another qualified plan or IRA. The IRS may waive the 60-day rollover requirement in certain situations. One-year waiting period for IRA rollovers: If you make a tax-free rollover of a distribution from an IRA, you generally cannot make another rollover from the same IRA within a one-year period. You also cannot make a rollover from the IRA to which the distribution was rolled over. IRA distributions paid to you are subject to 10% withholding unless you elect out of withholding or choose to have a different amount withheld. Withholding does not apply if the distribution is paid directly to another IRA trustee.

The above referenced information was obtained from reliable sources, however Lantern Wealth Advisors LLC and Lantern Investments, Inc. cannot guarantee its accuracy. The information presented herein is for presentation purposes only and is not intended to provide personal investment advice. Lantern Wealth Advisors LLC and Lantern Investments, Inc. do not provide tax, accounting or legal advice.

Comment   |  Flag   |  Apr 25, 2013 from Melville, NY

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6 votes

All excellent answers. Do check with your broker to make certain there will not be any charges to your investments due to early surrender, or, if there will be trading costs involved. He/She can also help you determine which investments in your portfolio would be most cost efficient for you to withdraw.

1 Comment   |  Flag   |  Apr 25, 2013 from Springfield, MO
Stephen

thanks, all is in cash, no investments yet

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Flag |  Apr 25, 2013 near Charlottesville, VA

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4 votes

Hi William! I'm curious as to why you are considering taking out money, and then putting it back in within 60 days. You are not required to take out funds until you turn 70 1/2, so if you don't need the funds, consider leaving them in and avoiding paperwork. You may want to spend some time with a financial planner in your area reviewing your situation to be sure you are maximizing your retirement funds.

Comment   |  Flag   |  Apr 25, 2013 from River Hills, SC

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3 votes
Rich Winer Level 20

Jonathan is correct. As he stated, you can only do one rollover per year, but that is from any one account. If you own three IRA accounts, you could do one rollover from each account per year, for a total of three rollovers. So, if you anticipate the need to do another IRA rollover this year, you might consider returning the assets you withdraw to a new/second IRA account.

1 Comment   |  Flag   |  Apr 25, 2013 from Woodland Hills, CA
Stephen

You are right, I am doing it on my own through Interactive Brokers a discount Firm. I am afraid I have already made some mistakes. I guess I just thought as long as I paid taxes on the withdrawals now or at the end of the year, It wouldn't matter how many withdrawals I made. I realize now that I shouldnt' be using it like a checking account. Regarding your comment on new IRA's, this would be only if I wanted to tax shelter the money I took out, right? and if so, would I have to open a new IRA for each withdrawal? The last question is, I wont get penalized for these withdrawals will I ? Thanks again

2 likes | 
Flag |  Apr 25, 2013 near Charlottesville, VA

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0 votes

All excellent answers. You can get an exception to the one time 60 day rollover, but how much money are we talking about? Is it a few hundred dollars, or tens of thousands. If it is a relatively low amount, you might want to just call it a lesson learned.

I think you might need some investment advice, and it does not appear that they are equipped to provide it where you are. Sometimes penny wise is pound foolish. Seek advice from several professionals, as well as trusted friends.

As for opening another IRA, there is no advantage. You can only contribute IRA rollovers and earned income. Two accounts sitting in cash has no more value than one with the same amount.

1 Comment   |  Flag   |  May 06, 2013 from Delray Beach, FL
Michael Steven Greenberg, CFP®

To correct myself, there would be an advantage to open another IRA if you were doing so for the purposes of diversification. It doesn't appear that that is a current objective

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Flag |  May 06, 2013 near Delray Beach, FL

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