The 60-Day IRA Rollover Rule: Complete Guide to Indirect Rollovers
How to move retirement funds between accounts without triggering taxes or penalties.
Key Takeaways
- 1You have exactly 60 calendar days to complete an indirect rollover
- 2Miss the deadline = full distribution taxed as income + 10% penalty if under 59½
- 3Only ONE indirect rollover allowed per 12-month period (across ALL IRAs)
- 4Direct (trustee-to-trustee) rollovers have no 60-day limit or frequency restriction
- 520% mandatory withholding on 401k distributions must be made up from other funds
- 6Weekends and holidays count toward the 60 days
- 7IRS can grant extensions for hardship - but it's not guaranteed
What Is the 60-Day Rollover Rule?
The 60-day rule governs indirect (hands-on) IRA rollovers:
- **You receive the money directly** - check made payable to you
- **You have 60 calendar days** to deposit it into another IRA or retirement account
- **The clock starts when you receive the check** - not when it's mailed
- **Complete the rollover = no taxes or penalties**
- **Miss the deadline = taxable distribution** plus 10% early withdrawal penalty if under 59½
- **No extensions except for IRS-approved hardships**
Direct vs Indirect Rollovers
Understanding the two types of rollovers is critical:
| Feature | Direct Rollover | Indirect (60-Day) Rollover |
|---|---|---|
| Money goes to | New custodian directly | You first, then new custodian |
| Time limit | None | 60 days |
| Frequency limit | Unlimited | Once per 12 months |
| Withholding | None | 20% from 401k distributions |
| Risk level | Very low | Higher - deadline risk |
| Best for | Most situations | Short-term cash need |
Always Prefer Direct Rollovers
Unless you specifically need temporary access to the funds, always request a direct (trustee-to-trustee) rollover. It eliminates the 60-day deadline and withholding issues.
The Once-Per-Year Limit
This rule catches many people off guard:
- **One indirect rollover per 12 months** - not per account, TOTAL
- **Applies across ALL your IRAs** - Traditional, Roth, SEP, SIMPLE
- **12-month period starts from the distribution date** - not calendar year
- **Second rollover within 12 months = taxable distribution** + penalties
- **Direct rollovers don't count** toward the limit
- **Roth conversions don't count** toward the limit
Common Mistake
If you did an indirect rollover from IRA #1 in March, you cannot do another indirect rollover from any IRA until the following March. Many people think each account has its own limit - it doesn't.
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The 20% Withholding Trap
When rolling over from a 401k, this catches many people:
- **20% mandatory withholding** on 401k distributions paid to you
- **You receive only 80%** of your balance in the check
- **Must roll over 100%** of the original amount to avoid taxes
- **Make up the 20% from other savings** or it's a taxable distribution
- **Get the withholding back** when you file taxes (but you need the cash now)
| Example: $100,000 401k Rollover | Amount |
|---|---|
| 401k balance | $100,000 |
| 20% withheld | -$20,000 |
| Check you receive | $80,000 |
| Amount you must roll over | $100,000 |
| Cash needed from savings | $20,000 |
| Get back at tax time | $20,000 |
Exceptions and Extensions
The IRS can extend the 60-day deadline in limited circumstances:
- **Self-certification for 11 specific reasons** (Revenue Procedure 2016-47)
- **Financial institution error** - they made a mistake
- **Postal error** - mail was lost/delayed
- **Death, disability, hospitalization** - yours or family member's
- **Federally declared disaster** - affected your ability to complete rollover
- **Must act in good faith** - can't have already used the money
Best Practices for IRA Rollovers
Follow these rules to avoid costly mistakes:
- 1**Always request direct rollovers** unless you have a specific reason not to
- 2**If doing indirect, mark your calendar** with the 60-day deadline immediately
- 3**Have cash available** to make up 20% withholding from 401k distributions
- 4**Keep records** of distribution and deposit dates
- 5**Track your once-per-year limit** across all IRAs
- 6**Consider a Gold IRA** for diversification during your next rollover
The 60-Day Deadline Is Absolute
Day 61 is too late. If you receive a distribution on January 1, you must complete the rollover by March 2 (or March 1 in non-leap years). Weekends and holidays count. Set a reminder for day 50 to ensure completion.
Rolling Over to a Gold IRA
If you're doing a rollover anyway, consider diversifying into physical gold:
- Direct rollovers to Gold IRAs work the same as regular IRAs
- No 60-day deadline worries with trustee-to-trustee transfers
- Diversify away from paper assets in your retirement
- Physical gold held in IRS-approved depositories
- Same tax advantages as traditional IRA
Frequently Asked Questions
1What happens if I miss the 60-day deadline?
The distribution becomes fully taxable as ordinary income. If you're under 59½, you'll also owe a 10% early withdrawal penalty. The only recourse is to request a waiver from the IRS if you qualify for an exception.
2Can I do multiple direct rollovers in one year?
Yes! The once-per-year limit only applies to indirect (60-day) rollovers. You can do unlimited direct (trustee-to-trustee) transfers between IRAs in the same year.
3Does the 60-day rule apply to Roth conversions?
No, Roth conversions are not subject to the 60-day rule or the once-per-year limit. You can convert from Traditional to Roth as often as you like.
4Can I use the money during the 60 days?
Technically yes, but it's risky. You must deposit the full original amount by day 60. If you can't come up with the full amount, the shortfall is a taxable distribution.
5How do I request a deadline extension from the IRS?
You can self-certify using a letter to the receiving IRA custodian if you meet one of 11 approved reasons. For situations not covered, you must request a Private Letter Ruling from the IRS (expensive and not guaranteed).
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