You can transfer your IRA to another broker at any time, and if you do it the right way there are no taxes, no penalties, and no limit on how often you can move accounts. The right way is a direct trustee-to-trustee transfer: the old broker sends your assets straight to the new one, and you never touch the money. Federal law under Internal Revenue Code Section 408 protects the account’s tax-advantaged status while it moves. What causes trouble is the other method, an indirect rollover, where a check gets cut to you personally and a 60-day clock starts.
Direct Transfer vs. Indirect Rollover
Every IRA move is one or the other, and the distinction shapes everything else. A direct transfer sends your assets from one custodian to another without a distribution ever being made to you. An indirect rollover puts a check in your hands, and you have 60 days to deposit the full amount into a new IRA before the IRS treats it as a taxable withdrawal.
Direct transfers win on every dimension that matters. They trigger no tax withholding. They generate no 1099-R in most cases because the IRS doesn’t treat them as a distribution. They aren’t subject to the once-per-year rollover rule. Indirect rollovers create tax forms, withholding gymnastics, and real risk of accidentally owing income tax plus a 10 percent early withdrawal penalty if you’re under 59½ and something goes wrong with the timing.
Unless you have a specific reason to have the cash in hand for up to 60 days, choose the direct transfer.
How to Start a Direct Transfer
The process begins at the receiving broker, not the old one. Open an account with the new firm first, and make sure the account type matches what you’re transferring. A Traditional IRA must go into another Traditional IRA. A Roth must go into another Roth. Moving between different account types isn’t a transfer; it’s a conversion, which triggers taxes.
The new broker will provide a Transfer of Assets (TOA) form, usually through their online portal. Before you fill it out, pull your most recent statement from the old broker and gather:
- The exact account number as shown on the statement.
- The legal name and mailing address of your current custodian, which can differ from the brand name on the website.
- The account type (Traditional, Roth, SEP, or SIMPLE IRA).
- Whether you’re moving the full balance or a partial amount.
Accuracy on this form is everything. A mismatch between your name, Social Security number, or account number on the TOA and what the old broker has on file will delay or reject the transfer. Cross-check every field against the statement before you submit.
How ACATS Moves Your Account
Once the new broker receives your form, they submit the request through the Automated Customer Account Transfer Service, an electronic system operated by the National Securities Clearing Corporation. ACATS moves stocks, bonds, mutual funds, and cash between participating firms without you having to sell anything first. Your holdings arrive at the new broker in the same form they left the old one.
After the request enters ACATS, the old broker (the “carrying firm”) has three business days to either validate the transfer or flag an exception. Exceptions usually come from mismatched account information, outstanding margin balances, or pending trades that haven’t settled. When nothing goes wrong, the full process wraps up in five to eight business days. Complex accounts can take two weeks or longer.
Proprietary Funds That Can’t Transfer
Proprietary mutual funds and other products unique to your old broker are classified as nontransferable assets under FINRA rules. If your new broker doesn’t accept those products, the old firm must contact you for instructions. You can liquidate the fund and receive the cash proceeds (minus any redemption fee), keep it in a residual account at the old broker, or have the shares transferred directly to you outside the IRA. Watch for back-end sales loads or early redemption fees on funds you haven’t held long enough; those charges come out of your account balance.
Check the Cost Basis After It Arrives
When the transfer completes, the new broker sends a confirmation statement listing what arrived. Verify the cost-basis data for each security. Cost basis tracks what you originally paid and determines your capital gains tax when you eventually sell. Fixing missing or wrong cost-basis information later is tedious, and it’s easier to flag discrepancies right away while both firms still have the transfer records handy.
The Indirect Rollover and Its 60-Day Deadline
An indirect rollover happens when the old broker cuts you a check instead of sending the assets directly. From the day you receive the check, you have exactly 60 days to deposit the full amount into a new IRA. Miss the deadline by one day and the entire distribution becomes taxable income. Under 59½, add a 10 percent early withdrawal penalty on top.
When the funds come from a qualified employer plan like a 401(k), the administrator must withhold 20 percent of the distribution for federal income taxes before sending you the check. On a $100,000 balance, you receive $80,000. To complete a full rollover, you have to come up with the withheld $20,000 out of pocket so that $100,000 total lands in the new IRA within 60 days. You get the withholding back when you file your return, but the cash gap in the meantime catches people off guard.
IRA-to-IRA distributions default to 10 percent federal withholding, and you can waive it entirely. This is one more reason direct transfers are simpler: they skip the withholding question altogether.
If You Miss the 60-Day Deadline
Under Revenue Procedure 2020-46, you can self-certify a waiver of the 60-day requirement by writing a letter to the receiving financial institution. The waiver is available only when the failure was caused by one of an approved list of reasons, which includes financial institution error, a lost check, a deposit into an account you mistakenly thought was eligible, severe damage to your home, death or serious illness in your family, incarceration, postal error, foreign country restrictions, an IRS levy, delayed information from the distributing institution, or the funds being sent to a state unclaimed property fund.
Self-certification isn’t a guaranteed safe harbor. The IRS can still audit the rollover and reject the waiver. Absent an audit, the receiving institution can accept the late contribution without penalty. For situations outside the approved reasons, you can request a private letter ruling from the IRS, though that process is slow and the filing fee runs over $10,000.
The One-Rollover-Per-Year Rule
The IRS limits indirect rollovers to one per 12-month period, applied across all of your IRAs combined rather than per account. Take a distribution from any IRA and roll it over within 60 days, and you cannot do another indirect rollover from any IRA for 12 months from the date you received the first distribution. A second indirect rollover in that window is treated as a taxable distribution, with the early withdrawal penalty on top if you’re under 59½.
Direct trustee-to-trustee transfers are exempt from this restriction entirely. You can move your IRA from broker A to broker B this week and to broker C next week using direct transfers, with no limit and no tax consequence. That alone is reason enough to always choose direct.
Inherited IRAs Follow Stricter Rules
If the account you’re moving is an inherited IRA, the rules narrow. A non-spouse beneficiary can transfer an inherited IRA to a new broker, but only through a direct trustee-to-trustee transfer. The 60-day indirect rollover option does not exist for non-spouse beneficiaries. If a non-spouse beneficiary receives a check for the inherited IRA balance, the entire amount is generally taxable as ordinary income with no way to undo it.
The new account also has to be titled correctly, showing both your name as beneficiary and the deceased original owner’s name (for example, “Jane Smith as beneficiary of John Smith, deceased, IRA”). Wrong titling can cause the IRS to treat the account as fully distributed.
Surviving spouses have more flexibility and can either transfer the inherited IRA into their own IRA or keep it as an inherited account. The 10-year distribution rule that applies to most non-spouse beneficiaries after an owner’s death in 2020 or later doesn’t reset when you change custodians.
If You’re 73 or Older, Handle the RMD First
A transfer doesn’t satisfy your required minimum distribution for the year. Federal regulations treat a trustee-to-trustee transfer as something other than a distribution, so it doesn’t count toward the amount you’re required to withdraw. You still need to take the full RMD for the calendar year, either from the old account before you start the transfer or from the new account after it lands.
The penalty for missing an RMD is 25 percent of the shortfall, dropping to 10 percent if you correct it within two years. Coordinating with both brokers before you initiate the transfer prevents the problem. Many people find it cleanest to take the RMD from the old account first.
Tax Forms to Expect
A direct trustee-to-trustee transfer between two IRAs generally does not generate a Form 1099-R, because the IRS doesn’t treat it as a distribution. The receiving broker reports the incoming amount on Form 5498, in Box 2. You’ll receive Form 5498 by the end of May following the tax year of the transfer.
An indirect rollover produces more paperwork. The old broker issues a Form 1099-R showing the distribution. A direct rollover from an employer plan to an IRA carries Code G in Box 7 and zero in the taxable amount box. For an indirect rollover where you received the funds personally, the code and taxable amount will differ, and you have to report the rollover on your tax return so the IRS can see that the money went back into a retirement account within 60 days. Failing to report it correctly is one of the most common causes of unnecessary IRS notices.
Fees to Watch For
Most brokers charge an account transfer or closing fee when you move assets out, typically $50 to $75. Complex holdings or alternative investments can push it higher. Check your old broker’s fee schedule before you start. Many receiving brokers will reimburse transfer fees for new accounts above a certain balance, so ask the new firm what they offer before you file the TOA.