IRA Rollover & Transfer of Funds
The process of moving existing retirement funds from one plan to another is referred to either as a rollover or transfer. There are specific IRS rules that govern what types of funds can be moved between various plans and the methods of executing and reporting on fund movement. Generally speaking, you can move funds from one plan to another and still retain the tax sheltered status of the funds. Most clients establishing a self directed IRA or Solo 401(k) will initially fund their new plan with a non-taxable transfer or rollover from an existing plan. There are 3 common methods of moving funds between plans.
IRA Transfer
A transfer describes the process of a direct, institution-to-institution transfer of like-kind IRA funds. Following are several examples:
- You can transfer a Traditional IRA at one institution to a new or existing Traditional IRA held by a different provider.
- A Roth IRA can only be transferred to another Roth IRA.
- Because the accounts on both ends have the same tax-deferred status, you can also transfer between employer IRA plans like a SEP or SIMPLE and a Traditional IRA.
- SIMPLE IRA accounts cannot accept inbound transfers from non-SIMPLE accounts, however, and may only be transferred to a non-SIMPLE account after the SIMPLE account has been active for two years.
A transfer is typically initiated by filling out paperwork with the receiving IRA custodian. They will then request the funds from the current institution. Because the funds are not distributed to the account holder, but rather go direct to the receiving plan, there is no tax implication and no tax withholding is required. There is no limit on the number or frequency of such direct transfer transactions.
Direct Rollover
A direct rollover occurs when funds are moved between different plan types, and are directly issued from the source plan to the receiving plan. The most common example is when one rolls over a former employer 401(k) or other qualified plan to an IRA.
Because the funds are not distributed to the account holder, but rather to the receiving plan, there is no tax implication and no tax withholding is required.
It is common for 401(k) and pension administrators to issue a rollover check to the new plan, but mail the check to the account holder, who then must forward the check to the receiving IRA custodian. Even though you might “handle” the funds, they are not viewed as having been distributed to you.
There is no IRS limit on the number or frequency of such direct rollover transactions. However, many 401(k) and pension administrators have their own policies limiting the number of rollovers you can execute per year, or may require that you rollover all funds and close your account in certain situations.
Indirect Rollover (60-Day Rollover)
An indirect rollover is a process whereby funds are distributed from the source plan to the account holder and then deposited to a new retirement account within 60 days. Because of the initial distribution to the account holder, there are specific rules regarding such events that must be followed closely. Failure to follow these rules will result in the amount being viewed as a taxable distribution with the addition of a 10% penalty for taxpayers under age 59 1/2. Funds absolutely must be deposited into a qualified retirement plan before the 60 day period expires. They can be deposited to the source plan, a new plan, or a different existing plan.
The tax treatment of the receiving plan should generally be the same as the source plan, though is is possible to combine a rollover from a tax deferred account with a conversion to Roth status.
Some source accounts – namely most qualified plans – will require that 20% be withheld for taxes. This really complicates the process of re-depositing funds, as you will need to come up with that 20% out-of-pocket, and will then get it back at tax time.
IRS rules limit such indirect or 60-day rollovers to one such transaction per taxpayer per 12-month period.
Rollover Chart
The Rollover Chart below comes directly from the IRS website. It’s a good tool for determining which types of retirement plans are eligible to be rolled from one plan to another.
click to view the full-size chart
The above chart can be viewed on the IRS Website. The IRS also provides good information on this topic in the memo Rollovers of Retirement Plan and IRA Distributions.
Current Employer 401(k) Plans
In most all cases, you cannot rollover funds from a current employer 401(k) or other qualified employer plan if you are under age 59 1/2. After age 59 1/2, a current employer must allow you to take an “in-service” distribution from your plan, and you can choose to roll this over to another plan such as a self-directed IRA. Some plans may allow for in-service distributions with other conditions such as length of service at ages younger than 59 1/2, but this is rare. If you are unsure, ask your plan administrator.
Roth Conversions
A Roth Conversion occurs when funds in a traditional IRA or other tax-deferred retirement account are changed to tax-free Roth status. In many cases, a Roth conversion will be performed as part of a rollover transaction, though you can also convert an account in-place. If you intend to both rollover funds between plans and perform a Roth conversion, take care to ensure you fully understand the tax implications and the administrative process of the transaction so it can be executed properly.
Additional Considerations for Self-Directed Plans
So long as you follow the rules for proper routing, reporting, and timing of plan-to-plan transfers or rollovers, you can enjoy great flexibility in allocating your retirement portfolio to the appropriate plan.
You can establish a Checkbook IRA and transfer only those funds you intend to invest in non-traditional assets at the current time. In the future, you can transfer more funds if you choose to allocate more of your portfolio to real estate, for example.
You can also transfer earnings from real estate or other non-traditional investments back to a traditional IRA held with a brokerage.
Help When You Need It
The experts at Safeguard Advisors fully understand the various rules surrounding plan-to-plan transfers and rollovers. We are also quite familiar with the administrative requirements of most of the common IRA custodians and plan administrators. If you have questions about whether your funds can be moved, or if you need help actually getting funds moved into your Safeguard self directed plan, we are here to help. We’ll make the process as easy as possible and ensure that all guidelines are followed so as to keep your funds tax-sheltered.
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Quick answers to common questions
We’ll take you through a simple, step by step process designed to put your investment future into your own hands…immediately. Everything is handled on a turn-key basis. You take 100% control of your Retirement funds legally and without a taxable distribution.
YES! In 1974, Congress passed the Employee Retirement Income Security Act (ERISA) making IRA, 401(k) and other retirement plans possible. Only two types of investments are excluded under ERISA and IRS Codes: Life Insurance Contracts and Collectibles (art, jewelry, etc.). Everything else is fair game. IRS CodeSec. 401 IRC 408(a) (3)
It’s actually pretty simple. Early on, regulators let the securities industry take the lead in educating the public about retirement accounts. Naturally, brokers and banks promoted stocks, bonds, and mutual funds—giving the impression that those were the only allowed investments. That was never true... and still isn’t. You can probably guess why they kept the rest under wraps.
It is possible to use funds from most types of retirement accounts:
- Traditional IRA
- Roth IRA
- SEP IRA
- SIMPLE IRA
- Keogh
- 401(k)
- 403(b)
- Profit Sharing Plans
- Qualified Annuities
- Money Purchase Plans
- and many more.
It must be noted that most employer sponsored plans such as a 401(k) will not allow you to roll youraccount into a new Self-Directed IRA plan while you are still employed. However, some employers will allow you to roll a portion of your funds. The only way to be completely sure whether your funds are eligible for a rollover is by contacting your current 401(k) provider.
A Solo 401(k) requires a sponsoring employer in the format of an owner-only business. If you have a for-profit business activity – whether as your main income or as a side venture – and have no full-time employees other than potentially your spouse, your business may qualify. The business may be a sole-proprietorship, LLC, corporation or other entity type.
A self-directed retirement plan is a type of IRA or 401(k) that gives you greater control over how your retirement funds are invested. Unlike traditional accounts held at banks or brokerage firms that limit you to stocks, bonds, and mutual funds, self-directed plans allow you to invest in a wide range of alternative assets including real estate, private businesses, precious metals, cryptocurrency, and more.
These plans still follow the same IRS rules and maintain the same tax-deferred or tax-free benefits as conventional retirement accounts. The difference is simply in how and where you choose to invest.
No. Moving to a self-directed IRA or Solo 401(k) does not trigger any taxes, as long as your funds are eligible for rollover.
Self-directed retirement plans maintain the same tax-advantaged status as traditional plans offered by banks or brokerage firms. The key difference is flexibility—our plans are designed to give you greater control and allow for a wider range of alternative investments beyond stocks, bonds, and mutual funds.
A prohibited transaction is any action between your retirement plan and a disqualified person that violates IRS rules and can lead to serious tax consequences. Under IRS Code 4975(c)(1), prohibited transactions include:
- Selling or leasing property between your plan and a disqualified person Example: Your IRA cannot purchase a property you already own.
- Lending money or extending credit between the plan and a disqualified person Example: You cannot personally guarantee a loan your IRA uses to buy real estate.
- Providing goods or services between your plan and a disqualified person Example: You can’t use your personal furniture to furnish a rental property owned by your IRA.
- Using plan income or assets for the benefit of a disqualified person Example: Your IRA cannot buy a vacation home that you or your family use.
- Self-dealing by a fiduciary (using plan assets for their own benefit) Example: Your CPA shouldn't loan your IRA money if they’re advising the plan.
- Receiving personal benefit from a deal involving your IRA's assets Example: You can’t pay yourself from profits your IRA earns on a rental.
If a transaction doesn’t clearly fall within the allowed guidelines, the IRS or Department of Labor may review the situation to determine if it qualifies as a prohibited transaction.
Disqualified persons are individuals or entities that are prohibited from engaging in certain transactions with your IRA or 401(k). Doing so could trigger a prohibited transaction, which may result in taxes and penalties.
Here’s who is considered a disqualified person:
- You (the account holder)
- Your spouse
- Your parents, grandparents, and other ancestors
- Your children, grandchildren, and their spouses
- Any advisor or fiduciary to the plan
- Any business or entity owned 50% or more by you or another disqualified person, or where you have decision-making authority
These rules exist to prevent self-dealing and ensure your retirement plan remains in compliance with IRS regulations.
(Reference: IRC 4975)
Understanding and following these rules can be tricky, but it’s very doable. The best way to stay compliant is to work with professionals who specialize in self-directed retirement plans. They can help you navigate IRS guidelines and avoid prohibited transactions.
If an IRA holder is found to have engaged in a prohibited transaction with IRA funds, it will result in a distribution of the IRA. The taxes and penalties are severe and are applicable to all of the IRA’s assets on the first day of the year in which the prohibited transaction occurred.
Yes. While self-directed retirement plans allow for a wide range of investments, there are a few important restrictions.
You cannot invest in collectibles or life insurance contracts, and you must avoid prohibited transactions—activities that benefit you personally rather than the retirement plan. These include things like buying or selling property to yourself or family members, using plan assets for personal gain, or self-dealing in any way.
Violating these rules could cause your entire IRA to lose its tax-advantaged status. To protect your account, it’s essential to work with professionals who understand IRS regulations and can help you stay compliant.
This is a common misconception. In many cases, professionals may simply be unfamiliar with self-directed retirement plans, as they fall outside their usual scope of work. CPAs and tax preparers are trained to file taxes, not necessarily to advise on alternative retirement strategies. Financial advisors and brokers often work for firms that focus on traditional investments like stocks and mutual funds—and may not benefit from or support alternative options like real estate or private lending.
Self-directed retirement investing is legal under IRS rules—but like any specialized area, it requires working with professionals who understand how it works.
The IRS has rules in place to make sure your IRA is used only for the exclusive benefit of the retirement account—not for personal gain or to help family members. These rules can get complicated because there are many ways a conflict of interest can occur, even unintentionally.
For example, if your IRA buys a house and rents it to your mother, you might be reluctant to evict her if she stops paying rent. That emotional connection creates a conflict between what’s best for your IRA and your personal relationships, something the IRS aims to prevent.
These rules help ensure your retirement account stays compliant and protected. (See IRC 408)
Yes. Most tax-deferred retirement accounts—such as Traditional IRAs, old 401(k)s, 403(b)s, and TSPs—can be rolled over into a self-directed IRA or Solo 401(k), depending on your eligibility. Roth IRAs cannot be rolled into these accounts.
You can contribute directly from earned income, subject to annual IRS contribution limits. The method and amount depend on the type of plan you have (e.g., Solo 401(k) vs. IRA).
To take a distribution, you'll request funds through your custodian or plan administrator. Distributions may be taxable depending on your account type and age. Early withdrawals may be subject to penalties.
For 2025, the Solo 401(k) max contribution limit is $81,250 if age 60-63, $77,500 if age 50-59 or 69+, and $70,000 if under 50. Traditional and Roth IRAs have a limit of $7,000 ($8,000 if age 50+). Limits are subject to IRS adjustments.
Yes. IRA contributions are typically due by your personal tax filing deadline (e.g., April 15). Solo 401(k) contributions follow your business tax filing deadline, including extensions.
IRS reporting requirements vary depending on the type of self-directed retirement plan you have. Here’s a quick breakdown of what you need to know
Please note: Our team can help you understand what’s required for your specific account, but we don’t provide tax or legal advice. We always recommend working with a qualified tax professional to ensure full IRS compliance.
Self-Directed IRA (Traditional or Roth)
- Form 5498 – Filed by your custodian each year to report contributions, rollovers, and the fair market value (FMV) of your account.
- Form 1099-R – Issued if you take a distribution or move funds out of your IRA.
- Annual Valuation – You'll need to provide updated FMV for any alternative assets held in the account, such as real estate or private placements.
Solo 401(k)
- Form 5500-EZ – Required if your plan assets exceed $250,000 as of year-end. Must be filed annually by the plan participant.
- Form 1099-R – Required if you take a distribution or roll funds out of the plan.
- Contribution Tracking – Keep records of employee and employer contributions. These are not filed with the IRS but may be needed for tax reporting or audits.
SEP IRA
- Form 5498 – Filed by your custodian to report contributions and FMV.
- Form 1099-R – Filed by your custodian. Issued for any distributions.
- Employer Contributions – Must be reported on your business tax return (and on employee W-2s, if applicable).
Health Savings Account (HSA)
- Form 5498-SA – Filed by your HSA custodian to report contributions.
- Form 1099-SA – Filed by your HAS custodian. Issued for any distributions.
- Form 8889 – Must be included with your personal tax return to report contributions, distributions, and how funds were used.
