The IRS considers any distribution from your Roth or traditional IRA a qualified distribution if you make it after you turn 59 1/2 or meet exemptions to its early distribution rules.
Because earnings you place in a traditional IRA are tax-deferred, if you liquidate a traditional IRA, even if it’s a qualified distribution, expect to pay tax on the entire amount as if it was ordinary income.
I was told I would need to liquidate my IRA with Principal and then invest the money with Schwab. I thought liquidating an IRA into cash and then putting it in another IRA would incur a tax or other penalty, if it doesn't, then I don't mind. There are a couple of different possible scenarios here, so just to make sure there's no confusion: If you simply sell the funds within your IRA (but the cash still sits in your IRA) and then transfer that IRA directly to another broker, there are no taxes or penalties. You have to be very particular that this is properly registered/reported, and not to keep a single Pennie to your pocket, as THEN IRA will nab you.
The Schwab agent who called me about this (and who I was talking to on the phone) told me there would be no tax penalty (although he said there could be a fee from Principal). I am liquidating an IRA into cash basically, right? I don't understand why it is I can't do what I want with my own money. If your new firm doesn't have an agreement on file for each of your funds they can not hold it. If you CASH OUT THE IRA ITSELF--which is different than the above in that you're taking your money OUT of the IRA--you have 60 days to move that money into a new IRA with another broker. Basically, you sell all your assets with company A, and transfer them, as re-investment, to company B. You will lose whatever brokerage fees they charge you and whatever losses you may incur from normal market volatility at the time of sale.
Need to be Sold to "Cash", the "Cash" can then be transferred to Schwab, then you can buy other Mutual Funds once its in your Schwab IRA. As a practical matter this is 100% normal and WILL NOT result in any tax consequences to your normal income. Apparently there is an electronic mechanism to transfer normal investment accounts so that stocks do not have to be sold, but there is no equivalent electronic mechanism to transfer (or roll over) a 401k or an IRA. But as other posters said - there is no tax implication to you because of that. When rolling a retirement plan from one institution to another, the money has to transfer in the form of cash.
This means shares of securities have to be liquidated into a dollar amount, (which is a universal asset class easily transferable between institutions) then transfered to a "shell" acct at the new institution.
Liquidating an IRA can be done at any time and for any reason.
However, the tax implications of liquidating your IRA depends on whether you have a traditional or Roth IRA and whether your distribution is qualified.
Unlike other investments, the Internal Revenue Service’s rules about taxing distributions – its term for any withdrawal from your IRA – are somewhat complicated, and the tax you should expect to pay if you liquidate your IRA depends upon the type of IRA, your age at the time of liquidation and other situations in your life.Suppose you've got ,000 of contributions in your Roth IRA and a total of ,000 in the account when you liquidate it.