When you move funds between individual retirement accounts (IRAs) of the same type, you can use a transfer or a rollover. Both options move your IRA assets, but the key difference is who handles the money during the process — and the tax implications that come with it. This article explains how each option works, what to avoid, and how to get started.
An IRA transfer (also called a trustee-to-trustee transfer) moves your IRA assets directly from one financial institution to another. The funds are always made payable to the new provider — never to you personally.
A transfer can typically be done through a wire, Automated Clearing House (ACH) transaction, or check. If a check is issued, it may be mailed directly to the new provider or sent to you to forward. Either way, the check is made payable to the financial institution, not to you.
Transfers are generally the preferred method for moving funds between two IRAs of the same type because they offer these advantages:
Unlimited frequency: You can transfer assets between your IRAs as often as you need.
No deadline: There is no 60-day time limit for depositing funds into the new IRA.
Nontaxable: Transfers are nontaxable and nonreportable, so you will not get a Form 1099-R.
When you request a transfer from a Gusto IRA, the check is mailed to you but made payable to your new financial institution. To finish the process, mail the check to your new provider following their transfer instructions.
An IRA rollover (also called a 60-day rollover) is when a cash distribution from an IRA is made payable directly to you. You are then responsible for depositing those funds into another IRA of the same type within 60 days of receiving them.
You can make rollover deposits separately, as long as the entire amount is rolled over within the 60-day window. The time limit starts the day after you get the money — either the day the ACH lands in your bank account or the day you get the check in the mail.
One benefit of a rollover is that it gives you temporary access to your IRA funds during the rollover period. However, there are several important implications to consider before starting a rollover.
Tax withholding. The same withholding rules for cash distributions apply to IRA rollovers. If taxes are withheld from your distribution, the entire amount — including any amounts withheld — needs to be rolled over to the new IRA within 60 days to avoid a taxable event.
One-per-12-month rule. You can only do one IRA rollover during a rolling 12-month period. The 12-month window begins on the date of distribution and applies across all of your IRAs (both Roth and traditional). If you do more than one IRA-to-IRA rollover during that period, only the first one meets Internal Revenue Service (IRS) rollover rules. Any additional rollovers within that 12-month window are considered ineligible. Conversions from traditional to Roth IRAs do not count toward this limit.
Required minimum distributions (RMDs) are not eligible. If you have reached the age to take RMDs, your RMD needs to be distributed from your IRA before the rollover is processed.
Same assets. You need to re-deposit the same type of assets you received. For example, if you get a cash distribution, you cannot use that cash to buy stock or property and then roll over those assets. Only cash can be rolled over to keep the tax-deferred status of the funds.
There are certain circumstances where you may be eligible for an extension or waiver of the 60-day requirement. Consult a qualified tax advisor for questions or guidance related to an ineligible rollover.
Rollovers that are not done according to IRS rollover rules — or that include funds not eligible for rollover (like RMDs or excess contributions) — may be subject to taxes and penalties.
The potential consequences of an ineligible rollover can include:
The ineligible rollover amount becomes taxable income. Unless you qualify for a penalty exception, the amount may also be subject to an additional 10% early withdrawal penalty tax if you are under age 59½.
You lose the ability to continue growing tax-deferred earnings (or tax-free earnings for a Roth IRA) on that amount, which could negatively affect your retirement savings.
Invalid rollovers are treated as regular IRA contributions for the current tax year. This could result in excess contributions and excise penalty taxes if not removed on time.
Failure to remove an ineligible rollover amount and any applicable earnings from your IRA by your tax filing due date (plus extensions) could result in being double-taxed on the amount. If the ineligible amount is not removed by the deadline, you may owe the IRS a 6% excise tax on the ineligible rollover amount for every year it remains in your IRA. The excise penalty tax can be assessed for up to six years from the date you file your federal tax return for the year the ineligible rollover happened.
Select the option that applies to your situation.
To move retirement funds from another provider into your Gusto IRA, make sure you have opened a Gusto IRA first. Then follow these steps.
Sign in at the Gusto Retirement sign-in page.
Go to Money movement in the main menu, then select Move money in.
In the IRA transfer or rollover card, select Select to consolidate your retirement accounts into your Gusto IRA.
Enter the details for the accounts you want to consolidate:
Select the type of account the funds are coming from and which account you want them added to.
Choose your previous retirement provider (where the funds will be sent from).
Enter the amount you will be moving to Gusto Retirement.
Review the information about next steps. You need to submit a rollover or transfer request with your prior provider to have the funds sent to Gusto Retirement. Select View instructions to see detailed guidance on how to request the check, where to mail it, and the expected timeline.
You can also transfer or roll over your Gusto IRA to another provider. To get started, go to Money movement in the main menu, then select Move money out. Find step-by-step instructions for an outbound IRA transfer or rollover.
The information provided herein is general in nature and is for informational purposes only. It should not be used as a substitute for specific tax, legal, and/or financial advice that considers all relevant facts and circumstances. You are advised to consult a qualified financial adviser or tax professional before relying on the information provided herein.