IRA Transfer Methods
Transfer methods describe the way an IRA account is funded. All of the following transfer methods are cash transactions, and Trustee-to-Trustee transfers can also use an ACATS position transfer in Client Portal.
- Contribution - The dollar amount of assets you are contributing to an IRA account, subject to certain limits based upon your age and the year of the contribution. Contributions are reported to the Internal Revenue Service (IRS).
- Rollover - A transfer of funds from an IRA account with another trustee/custodian, within 60 days following a distribution, to an IBKR IRA account. Rollovers are required to be reported to the IRS. IRA account types must be the same in order to rollover assets, for example if the originating account is a Roth IRA, your account must also be a Roth IRA.
- Direct Rollover - A transfer of funds from a qualified plan (pension, 401(k) or other qualified retirement plan) with an employer to an IBKR IRA account. In a Direct Rollover, the trustee/custodian of your employer qualified plan (401(k) or pension) transfers your retirement assets directly to us. In general, no withholding tax or penalties apply to a Direct Rollover, however Direct Rollovers are reported to the IRS.
- Trustee-to-Trustee - A transfer of funds from an IRA account held with another trustee/custodian to an IBKR IRA account, where the assets are transferred directly trustee/custodian to trustee/custodian, with no distribution of assets to you. ACATs position transfers are available, however the IRA account type and Tax ID must match in order to execute the transfer. Trustee-to-trustee transfers are not required to be reported to the IRS.
Refer to the Tax Reporting page on our website for information on IRS forms you will receive when transferring retirement plan assets.
The following table lists all available IRA types and applicable transfer methods.
| IRA Type | Description | Applicable Transfer Method |
|---|---|---|
| Traditional |
A retirement savings plan that allows an individual taxpayer to contribute earnings until they are withdrawn. Contributions are subject to annual limits depending on the age of the account owner and may or may not be deductible depending on the individual’s circumstances. Earnings accumulate tax deferred until distributed to you at which time the earnings are subject to tax upon withdrawal. A spouse may contribute to a separate account subject to the same limits. Withdrawals made prior to age 59½ are subject to a 10% penalty unless certain special circumstances apply. Distributions must begin by the account owner’s required beginning date (RBD), which is April 1 following the year you turn age 70½. Once you reach age 70½, you must withdraw at least a minimum amount – an annual Required Minimum Distribution (RMD) - by December 31 of each year. If an account owner fails to withdraw the full amount of the RMD annually, or fails to withdraw the RMD, there is a 50% tax penalty on the amount not withdrawn. |
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| Traditional Rollover | A traditional IRA account that receives assets directly from an employer-sponsored plan such as a 401(k) or pension plan within 60 days of distribution from the plan. As long as no other assets are contributed to the Traditional Rollover IRA, the monies may be rolled over into a new employer's plan. A traditional rollover IRA is commonly used if you are changing jobs or retiring. |
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| Traditional Inherited | An IRA account you may set up as the beneficiary of a Traditional IRA you inherited from a spouse or other IRA account owner who has died, to receive a transfer of beneficiary IRA assets. |
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| Roth | A retirement savings plan that allows an individual taxpayer to contribute earnings, subject to certain income limits. Earnings accumulate tax-free and contributions are nondeductible. Unlike Traditional IRAs, a Roth IRA account owner may continue to contribute after age 70½ if they have earned income. Withdrawals prior to age 59½ are subject to a 10% penalty unless special circumstances apply. There are no age requirements when an account owner must begin taking distributions. Contributions are subject to annual limits depending on the age of the account owner. |
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| Roth Inherited | An IRA account you may set up as the beneficiary of a Roth IRA you inherited from a spouse or other IRA account owner who has died, to receive a transfer of beneficiary IRA assets. |
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| Simplified Employee Pension (SEP) | A tax-deferred retirement plan for small businesses and self-employed individuals where an employee can set aside a percentage of pre-tax income into the plan. Annual contributions an employer makes to an employee's SEP-IRA cannot exceed the lesser of 25% of compensation, or $52,000 for 2013 and $53,000 for 2014. The same limits apply to contributions made to a self-employed individual's SEP-IRA. There is 100% vesting of all plan contributions. Distributions generally follow the same rules that apply to IRAs. |
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| Simplified Employee Pension (SEP) Inherited | An IRA account you may set up as the beneficiary of a SEP IRA you inherited from a spouse or other IRA account owner who has died, to receive a transfer of beneficiary IRA assets. |
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