Transfering partial IRA funds to another custodian
L1: Transfering partial IRA funds to another custodianI established my 72T with Fidelity starting January, 2004. I would now like to take about half of it out of Fidelity and open two or three IRA accounts at local banks. Other than having the funds transfered from trustee to trustee, is there anything else I need to do or to be aware of. I plan to take all 72T withdrawals from Fidelity, so is there anything that I need to tell the local banks. I realize that the withdrawal calculations for 2010 will be based on all the accounts. I assume that I get the year-end statements from the local banks and send to Fidelity so they can do the proper calculations.2009-04-29 00:04, By: Smoke, IP: [22.214.171.124]
L2: Transfering partial IRA funds to another custodianUnless you are using a recalc plan or MD method, there are no new calculations to be made, and nothing to tell the banks. You would just continue your prior annual distribution amount from Fidelity as before until the modification date for the plan. You would have to be sure that the bank IRAs are created by direct transfer as you indicated, due to the one rollover rule per 12 month period, and that no distributions were taken from the bank IRAs for any reason. You would also have to plan to attach Form 5329 to report your 72t exception because Fidelity is not likely to code their 1099R with the “2” exception code in Box 7.TheFidelity 1099R should only report the 72t distribution dollars because direct transfers are non reportable.If you are using the MD method or making the one time switch to MD, please advise as that would introduce more pitfalls.
Finally, since you are doing a partial transfer, note that the IRS did bustone plan for doinga partial transfer. See PLR 2007 20023. This is considered an aberration and presents very little risk to you, but you still should be aware of the situation.
If you want to put some of your IRA into CDs, Fidelity can provide that within their brokerage IRA accounts. These CDs are FDIC insured, so you may want to consider that to simplify things and reduce the moving parts. This month I had a bank fail that held a CD in a Schwab brokerage IRA, and the FDIC payout was back in the account along with accrued interest within 11 days.
2009-04-29 03:21, By: Alan S., IP: [126.96.36.199]
L3: Transfering partial IRA funds to another custodianI STRONGLY agree with Alan that you would be much better off by using the brokerage platform at Fidelity to purchase CD’s,or other “alternative assets,”rather than trying to transfer part of your assets to several banks. Moving assets aroundlike you are contemplating will open up more cans of worms than you can imagine. The advantage of using a brokerage account is the ability to put just about anything in the account and keeping your life relatively simple and straight forward.
Jim2009-04-29 15:18, By: Jim, IP: [188.8.131.52]
L4: Transfering partial IRA funds to another custodianJim,
I agree that buying CDs through Fidelity is much easier and less risky. However, I have several stable banks in my town that are paying 2.5 to 3 % on a 1-year CD. There is nothing even close to that available through Fidleity. All the 1-year CDs pay @ 1 %.
2009-04-29 17:36, By: Smoke, IP: [184.108.40.206]
L3: Transfering partial IRA funds to another custodianAlan, I am using the RMD (life expectancy) method, so what is the proper procedure to get the December 31st account balancesto Fidelity so they can recalculate my 2010 payment using the balances in all my accounts?2009-04-29 22:49, By: Smoke, IP: [220.127.116.11]
L4: Transfering partial IRA funds to another custodianOK, that explains the annual recalculation. While the basic responsibility is yours, if Fidelity has been completing the calculations for you, keep in mind that they may not opt to do so if they do not hold all the funds. The first part of this is getting the correct year end figure from each bank, and that may be available on your year end statement, or you may have to ask for it. Then just add up the totals and send them to Fidelity using whatever communication method they deem best.
Note that you can estimate the balance in January based on preliminary indications, but if the 5498 forms or equivalent statement that each bank issues shows adifferent year end total, you will have to get that info to Fidelity to readjust the annual payment. Again, the frequency or amounts of your interim payments do not matter as long as the annual distribution is correct. As with all plans, you should double check the amount you have received in December so there is time to make corrections if needed before year end.
As Jim indicated, this is doable but may not be worth the added work and the added risk you will have to go through for the additional yield, but if you can make 2% more locally I understand thedesire to do this. Life will be easier if youcan structure the CD expirations to dates beyond the plan modification date to avoid the need to move the funds again before the 72t ends. There is no legal requirement for a bank to offer a direct trustee transfer, and it is best to avoidindirect rollovers if possible.
Since many of the banks the brokers use are not in good shape and need to raise funds, it is somewhat surprising that the available yields are not higher vrs many smaller community banks.
2009-04-29 23:48, By: Alan S., IP: [18.104.22.168]