Traditional IRA Rollover

A traditional IRA rollover occurs when you transfer assets from one retirement account to another qualifying account (typically another IRA). In most circumstances, it’s a good idea to do a direct rollover to preserve the tax advantaged status of the invested amount and growth within the traditional IRA account (in contrast to a Roth IRA rollover where taxes have already been paid on the invested amount and the growth is accumulating tax-free).

Although traditional IRA rollovers are fairly straight forward, one thing to consider is the potential tax implications of rolling the balance over vs. taking the funds (and incurring a taxable event and a potential penalty) and re-investing the amount in a traditional taxable investment account.

Because distributions from an IRA account are treated as income during the year in which they’re received and long term gains in a taxable account are taxed at the typically lower capital gains tax rate, depending on your individual situation, it may make sense to incur the taxable event and penalty in exchange for the lower capital gains tax rate on the continued growth of the investment.

(As always, be sure to consult a professional and discuss your individual circumstances before making any decisions regarding your traditional IRA rollover.)