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Finance

What Are the Best Tips for a SEP-IRA Rollover?

Kristie Lorette
By Kristie Lorette
Updated Jan 25, 2024
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When conducting a SEP-IRA rollover, the account holder has two different options for moving the account from a SEP-IRA into another type of investment retirement account or from another type of retirement account to a SEP-IRA account. One option is an indirect rollover. The other option is a direct rollover. Which route the account holder should take depends on the personal situation, but there are some tips for the account holder to use as guidelines.

First, the account holder should conduct some research. Research should include the type of retirement investment account that fits into their own personal situation and helps them to meet their goals. This is true regardless of whether the account holder is conducting a SEP-IRA rollover into a different type of retirement account or into a SEP-IRA from another type of retirement investment account.

It is also wise to consult with a tax advisor prior to making any SEP-IRA rollover decisions. A tax advisor provides the account holder with information on the best types of retirement account options for the individual’s personal tax situation. This can minimize the amount of taxes the account holder pays when it comes time to start making withdrawals from the account. Tax advice can also maximize contribution amounts, while minimizing tax payments.

An indirect transfer allows the account holder to receive the money for the SEP-IRA rollover money. The check, however, will only be for 80% of the total account amount. The 20% that remains is held back as a fee. When the account holder opens the new retirement investment account and deposits the check into it, the initial investment firm holding the account will release the remaining 20% for deposit into the new account.

It is only wise to choose an indirect option if the account holder will open and fund the SEP-IRA rollover account with the allotted time period, which can be up to 90 days from the withdrawal date. If the account holder does not have the means to accomplish this prior to the deadline, then it is best not to use the indirect option.

The best option for a SEP-IRA rollover tends to be the direct option. This option is a faster, simpler and cleaner way to complete the transfer. The account holder simply opens the SEP-IRA rollover account. The new account firm contacts the old firm, and with properly signed paperwork by the account holder, initiates the transfer of the funds from the old account to the new account.

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