Consider fees, options before rolling over IRA

HIS Capital Group believes in the power of knowledge. For this reason our office is dedicated to providing valuable and topical information produced by the HIS team and respected sources across the globe. Thousands of investors across the U.S. are faced with the daunting task of identifying a safe yet profitable harbor to roll over their IRA. This week we check back in with elite financial correspondent to Tribune Newspapers, Janet Kidd Stewart and pose a couple questions from our mail bag.

Consider fees, options before rolling over IRA

Q: I’m over 60 and have three IRAs due at three different banks. I want to roll over my money to three new banks. The banks want to charge me for electronic transfers, but why should I pay my money to transfer to another bank when I can get a check from each bank and go to another bank the same day?

A: Perhaps you mean you have three individual retirement accounts invested in bank certificates of deposit coming due, and you want to roll over the accounts to new banks yourself instead of executing a direct transfer between the custodians.

You can get a check from each bank and deposit them into new IRAs one time per account each year (as opposed to direct transfers, which are unlimited), but that doesn’t guarantee the switch will be free.

“You can do it, just be careful,” said Ed Slott, a Rockville Centre , N.Y., accountant who specializes in IRA issues.

When rolling over to a new custodian, IRA owners have 60 days to move the money to a new institution. Without an Internal Revenue Service extension or waiver, a taxpayer who fails to redeposit the money will owe income tax on the entire amount, Slott said, though you are beyond age 591/2, so you wouldn’t be subject to the additional 10 percent penalty.

Beyond the tax consequences, be sure to ask the bank exactly what you’ll be charged. Some custodians have record-keeping fees for closing an IRA that would be charged regardless of whether you transfer the account electronically.

You might consider whether the new banks’ rates are worth the legwork and fees involved. In the bigger picture, there may be other safe investments that don’t require such a runaround at every turn.

Many brokerages offer a platform of bank CDs that let you spread your money across several institutions to maximize your Federal Deposit Insurance Corp. protection. Some cover the previous custodian’s exit fees, so shop around.

Q: I (turned) 70 in October and have an IRA annuity. Do I have to start withdrawals or can I leave it until I need it? Will I be penalized if I leave it?

A: This is the year you turn 701/2, so remember that for this year only, you may delay taking the required distribution until April 1, 2013. For subsequent years, including 2013?s distribution, you’ll need to take the money by Dec. 31. For details, check out the IRS website at irs.gov/retirement/article/0,,id=96989,00.html

If you have “turned on” the annuity monthly payments, those payments can fulfill your required distribution, Slott said. If you haven’t, you will need to take distributions, and you’d have stiff penalties for failing to do so (50 percent of the amount that should have been distributed).

If you have nonannuity investments in another traditional IRA, you could take your total required distribution from that account, Slott said. Just make sure your tax preparer knows the rules.

Q: I am an 88-year-old man living in a retirement community, with an IRA, other savings and Social Security. Can you advise whether to buy an annuity?

A: Annuities are complex insurance products with an unfortunate track record of complaints about sales, particularly to elderly customers. PeggiMoxley, board president of the Washington chapter of the National Academy of Elder Law Attorneys, said high commissions and surrender charges often associated with deferred annuities make them unsuitable for many seniors.

Even lower-cost immediate annuities don’t make sense for the very elderly in most cases, she said, because of the likelihood they will die before recouping their investment. One rare exception is in the area of Medicaid planning, where they can be used to protect some income for spouses of nursing home residents, she said.

To learn more about our turnkey approach to real estate investing and how others are using their retirement plans to safely invest in real estate (tax free in many cases), please feel free to call us direct at 877-452-6569 x 115

By:Sam Ally