moving IRA?

Question

I have two IRA accounts. Both tradational. Can i move my money from one to other without penalties? Do I have to open a new rollover IRA account? If not, then what is a roll over IRA?

the 2 IRAs have deductible contributions so far. But this year, i will make a non deductible contribution. Will that be a problem?

Answer 1

Typically, as long as the IRAs are both traditional, there shouldn't be a problem consolidating the two accounts. It kind of depends where the IRAs are being held. Banks typically have no problem with consolidating, but it might be a bit trickier at a brokerage. However, at no time should you personally handle the money. This must be a transaction that's handled by the two financial institutions. You absolutely must not touch that money, otherwise the money will be considered as a distribution and the transferor of the IRA will be required to withhold 20% of the IRA transfer money-not a good thing, believe me!

Just as a note, if one of these accounts has deductible IRA contributions and the other one is non-deductible, then the two shouldn't be combined. It can make for a tax nightmare later on when you start making withdrawals from the account. (nondeductible IRAs have "basis", tax deductible IRAs don't)

Answer 2

You can move money from one IRA to another, with no penalty, as long as the company managing the fund allows it. Some funds are closed and do not take new investments.
A rollover IRA is for persons who have funds in some other sheltered account, like a 401k. If you quit your job or retire, you employer may not let you keep the 401k. The rollover does not cost anything and there are no penalties. Any amount can be rolled over.