New Rules for IRA Rollovers

The times, they are a’changing, and so are the rules for IRAs. In the past, the general rule was that you could use your IRA as needed without penalty, with one catch. That “catch” was that you had to return the money within two months or sixty days. Providing you did that, your earnings remained tax-deferred, and you didn't have to pay any taxes. Furthermore, you could do that with any IRA you owned. So, potentially, if you had four IRAs, you could get four tax-free and penalty-free rollovers per year.

In a move that has United States citizens up in arms, however, the United States Tax Court recently ruled that only one penalty-free IRA rollover is now allowed per year. So, now, even if you have those four IRAs, you can still only get one rollover per year without paying the price.  

This new rule isn’t in effect yet. Once 2015 rolls around, though, the new rule will be in place. As a result, many citizens are “stocking up” and getting in as many rollovers as they can. That’s probably not the smartest move though. There’s no reason to take money out “just because” if you don’t actually need it.

For now, you’ll just have to learn with the new rules. Budgeting your money better so that you have enough savings to cover those emergency expenses and thus don’t have to rely on your IRA as a safety net is one step toward keeping this new rule from negatively impacting you.

Related articles

• What New IRS Rules Mean for Your Retirement Account (money.usnews.com)