It is crucial to avoid negative tax implications when performing an IRA Transfer or IRA Rollover. If performed properly, your IRA will maintain its tax-deferred status and there will be no tax liability for a direct rollover or transfer. First, it is necessary to understand the difference in terminology.

What is an IRA Rollover?

An "IRA Rollover" or "Rollover IRA" is a tax free transfer of funds from an ex-employer's retirement plan such as a 401(k), 403(b), 457, or Thrift Savings Plan to an IRA. An IRA Rollover occurs when an employee changes jobs or retires and as a result they are entitled to distribute or "rollover" their previous employer's retirement plan to an IRA.

What is an IRA Transfer?

The term IRA Transfer is used to describe a transfer of assets from one IRA held at one financial institution to an IRA held by a different financial institution. An IRA Transfer from one financial institution to another via a custodian to custodian transfer is made tax free and there is no tax liability.