How do use the indirect rollover process to move my IRA into Betterment?

Last Updated: December 18, 2014 12:19PM EST
The indirect rollover process involves withdrawing from your current IRA and re-depositing the funds into another IRA within 60 days. The new rule taking effect after January 1, 2015 will limit the use of this indirect rollover process to once per individual per 12 month period. If you have used this method in the past 12 months, we recommend using the direct transfer process instead.

This method avoids any negative tax consequences and there are just two easy steps:
  1. Ask your provider for an early distribution with no withholding. Your provider may call it a "premature distribution", and this is the same thing. Again - there are no negative tax consequences for this.
  2. Deposit that money into your Betterment IRA within 60 days to avoid tax penalties.  Log in and go to the Transfer tab. Enter the amount of your rollover and select "IRA Rollover" as the contribution type:


Exceptions & Special Conditions:
  • The 12 Month Rule. If you have used the indirect rollover method in the last 12 months, there could be further IRS restrictions. Let us know if this applies to you, and we'll do a direct transfer.
  • Note on Form 1040 at Tax Time. Note your rollover on Form 1040 using the 1099-R your old provider will give you when you file your taxes for this year. Betterment will not give you any tax forms, but will report your rollover contributions to the IRS directly in May on Form 5498.
  • Same-Type Rule. You can only roll over between IRAs of the same type. A Traditional IRA, SIMPLE IRA or SEP IRA can only be rolled over into a Betterment Traditional IRA. A Roth IRA can only be rolled over another Roth IRA.
  • Contribution Limit. Rollover contributions do not count towards your IRA contribution limit, since you're only moving over funds not adding to them. 
  • Simple IRAs. Note that you cannot roll out a SIMPLE IRA before you've held the account for at least two years, according to IRS rules.
  • Spousal IRAs. Note that you cannot roll over a spouse's IRA into your Betterment account - your spouse will need to create their own Betterment account to roll their IRA into. 
  • Inherited IRAs and Annuities - If you are rolling over an Inherited IRA or a qualified annuity, we'll do a trustee-to-trustee transfer instead, to avoid negative tax consequences. Please contact us to get started. You can read more about rolling over inherited IRAs into Betterment here
To read more about this process and to find specific answers to your tax questions, refer to the IRS Publication 590.


Related Questions:
How do I convert my Betterment Traditional IRA into a Roth IRA?
How can I rollover my 401(k), 403(b), or a similar plan into Betterment? 
Can I rollover an Inherited IRA/401(k) or other retirement plan into Betterment? 
How will the 2015 IRS changes to the "Indirect Rollover" process impact me?

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