A traditional Individual Retirement Account can be transferred online, by phone or in-person, indicates Fidelity on its website. To rollover funds from employer-sponsored 401(K) plans to traditional IRAs, investors complete funds withdrawal paperwork and receive a check, which they manually deposit into the IRA.
When moving IRA funds from one institution to another, the transfer method is simpler, does not incur the risk of taxes and penalties, and is non-reportable, which means the investors can transfer funds between IRAs an unlimited number of times within a year, explains Investopedia. These advantages exist because the investor does not take physical custody of the funds.
In the case of a rollover, the investors receives a physical check, Investopedia notes. This check must be deposited into a qualified IRA account within 60 days in order for the investor to avoid paying regular income tax and a 10 percent tax penalty on the funds. The tax penalty applies only to investors under the age of 59 1/2. Another disadvantage is that investors can rollover the same IRA dollars no more than once per year.
IRAs offer a wide-array of investment vehicles from which investors choose, indicates Fidelity. Popular options include stocks, bonds, exchange traded funds and Federal Deposit Insurance Corporation insured CDs. Many IRAs offer investors the ability to reallocate funds online.