Direct RollOver and avoiding hidden penalties
Are there any hidden penalties if over 59 1/2 if performing a direct roll over ‘trustee to trustee’ transfer of only 50% of company plan to a traditional IRA? Leaving the rest in the company plan for maybe another year or longer & my company says it is ok. No limitations of how many rolls of remaining company plan money anytime if a trustee to trustee transfer or no limitations? What if you have some after tax in the company plan, can I ask for two checks (1 for the pre-tax and 1 for the after tax which is not alot on after tax) for ‘For Benefit Of’ checks and then put the after tax into a ROTH IRA even though I did not qualify when working for a ROTH IRA? My broker recommended I open a traditional direct rollover IRA account that can be left open (empty) for 6 months and then canx If I do not transfer any money into the IRA. Is that correct or an issue? Also, as long as my future IRA has a spouse name as primary beneficiary and the contingent beneficiary is a trust it will transfer tax deferred upon death?
Permalink Submitted by Alan - IRA critic on Mon, 2019-07-15 17:41
Yes, there should be no tax or penalties on these transactions. Check with the plan if you can do a direct rollover of the after tax balance to your Roth IRA in addition to the partial pre tax balance. There are no IRS limitations, but it is up to your plan what your options are with partial distributions. Be sure no after tax amounts are rolled into your TIRA account, you want them in your Roth unless you need to spend them. It does not matter that you could not contribute to a Roth while working and no income limits apply for rollovers at any time. Your IRA will pass directly to your beneficiary (spouse) upon your death and your spouse can elect to assume ownership of that inherited IRA at anytime. If spouse is under 59.5 when they inherit the IRA, they will probably want to keep it in inherited status until they are 59.5 to avoid any early withdrawal penalty if they need to take a distribution.