What is an indirect rollover?

An indirect rollover is a method of transferring funds from one retirement account to another without directly transferring the money between accounts. Instead, the funds are distributed to the account holder who then has 60 days to deposit the money into another eligible retirement account to avoid penalties and taxes.

There are specific rules and requirements that must be followed when conducting an indirect rollover, such as only being allowed to perform one indirect rollover per 12-month period and ensuring that the funds are deposited into the new account within the 60-day timeframe. Additionally, the account holder must report the transaction to the IRS on their tax return.

It's important to note that not all retirement accounts are eligible for indirect rollovers. For example, employer-sponsored retirement plans like 401(k)s may have restrictions on indirect rollovers, so it's essential to check with the plan administrator before initiating the transfer.

Overall, an indirect rollover can be a useful method for transferring funds between retirement accounts, but it's crucial to follow the rules and guidelines to avoid incurring penalties and taxes.