What is the one-rollover-per-year rule? (2024)

FAQs

What is the one-rollover-per-year rule? ›

IRA one-rollover-per-year rule

Under the rule, you can only make one IRA rollover per year. This means that if you take a distribution from one IRA, you have 60 days to deposit it into another IRA. If you take another distribution from an IRA within that 60-day period, you will be taxed on the earnings from the first distribution.

You can rollover a 401(k) to another 401(k) or IRA multiple times per year without breaking the once-per-year IRS rollover rules. The once-per-year IRS rule only applies to the 60-day IRA rollovers.

IRA Transfer Rules

Only one transfer may be made per 12-month period.

A rollover occurs when you withdraw cash or other assets from one eligible retirement plan and contribute all or part of it, within 60 days, to another eligible retirement plan.

You generally cannot make more than one rollover from the same IRA within a 1-year period. You also cannot make a rollover during this 1-year period from the IRA to which the distribution was rolled over.

You are allowed to do only one IRA “rollover” within any one-year period, regardless of how many IRAs you own. “Rollover” in this context means an “indirect” or “60-day” rollover, wherein funds are withdrawn from one IRA account and moved to another, tax-free, within 60 days of the withdrawal.

The cons: You'll need to liquidate your current 401(k) investments and reinvest them in your new 401(k) plan's investment offerings, which will take time and some research. The money will be subject to your new plan's withdrawal rules, so you may not be able to withdraw it until you leave your new employer.

One of those tools is known as the Rule 72. For example, let's say you have saved $50,000 and your 401(k) holdings historically has a rate of return of 8%. 72 divided by 8 equals 9 years until your investment is estimated to double to $100,000.

Any Traditional 401(k) assets that are rolled into a Roth IRA are subject to taxes at the time of conversion. You may pay annual fees or other fees for maintaining your Roth IRA at some companies, or you may face higher investing fees, pricing, and expenses than you did with your 401(k).

What is the difference between a transfer and a rollover? ›

A transfer occurs when you instruct your custodian to move your assets from your current IRA to an IRA at another institution. A rollover, on the other hand, involves transmitting retirement assets to an IRA from a different type of account, like a 401(k) or 403(b). The IRS also treats them differently.

Even if you hold multiple retirement accounts, you are only eligible to make one rollover per the 12-month regulation period set by the IRS. Violating these terms can result in a taxable distribution and a 10 percent penalty if the individual is under the age of 59 ½.

If you want the ability to choose more independently, you'll want to choose a rollover. This is because you're moving from an employer-sponsored plan to an IRA with more investment options. Transferring is much simpler if you don't care as much about specific funds and are just looking to streamline.

The Roth IRA five-year rule says you cannot withdraw earnings tax-free until it's been at least five years since you first contributed to a Roth IRA account. This five-year rule applies to everyone who contributes to a Roth IRA, whether they're 59 ½ or 105 years old.

The Internal Revenue Service (IRS) requires a waiting period of 5 years before withdrawing balances converted from a traditional IRA to a Roth IRA, or you may pay a 10% early withdrawal penalty on the conversion amount in addition to the income taxes you pay in the tax year of your conversion.

In this case, to meet the 5x rollover requirement, you would need to wager a total of 5 times the combined amount of your deposit and bonus. So, 5 x $200 = $1000. This means you would have to place bets totaling $1000 before you can withdraw any bonus funds or associated winnings.

Direct IRA Rollovers

There are no IRS limits in the number of direct rollovers you can make in a year.

You can only make one rollover from an IRA to another (or the same) IRA in any one-year period, regardless of the number of IRAs you own. A trustee-to-trustee transfer isn't a rollover and isn't affected by this rule.

Does my rollover count as a contribution? No. It is considered separately from your annual contribution limit. So you can contribute additional money to your rollover IRA in the year you open it, up to your allowable contribution limit.

The Internal Revenue Service (IRS) requires a waiting period of 5 years before withdrawing balances converted from a traditional IRA to a Roth IRA, or you may pay a 10% early withdrawal penalty on the conversion amount in addition to the income taxes you pay in the tax year of your conversion.