Process

• A rollover is a technical term for the process of moving your money from one IRA to another IRA account. In a rollover, you take receipt of the funds you are moving into another account. The brokerage house sends you a check and you have 60 days to open a new IRA account with your retirement funds.
  
  

Significance

• The significance of the IRA rollover process is that it gives you maximum control over the transfer of your IRA money. Unlike a direct transfer, you receive the funds that will be deposited into the new IRA account. When you receive the check, the brokerage withholds 20 percent of your total account balance for taxes. In a sense, this type of transfer is less efficient than a direct transfer, since you must open your new account and then move the withheld taxes from the old account to the new account.
  
  

Time Frame

• When you move your money from one IRA to another, there is generally no tax unless you fail to open a new IRA within 60 days of receiving funds. The IRS imposes this 60-day window to ensure a prompt transfer of your retirement money to your new IRA account.
  
  

Type

• You pay ordinary income taxes on IRA transfers. However, most IRA rollovers are not taxed unless you miss the 60-day window. The exception is the Roth IRA. When you transfer funds from a traditional IRA to a Roth IRA, ordinary income taxes are always due on the entire amount of the transfer. If you transfer $50,000, you will pay taxes on the entire $50,000.
  
  

Considerations

• Instead of using the more complex process of a rollover, consider a direct transfer, where the brokerage transfers the money on your behalf. This sometimes is referred to as a trustee-to-trustee transfer. This transfer never runs the risk of incurring a tax liability, with the only exception being a conversion from a traditional IRA to a Roth.