- 1). Roll funds to a new IRA. If you wish to switch IRA custodian for any reason, simply open a new IRA account and transfer your account. Banks and brokerage firms are equipped both to set up your new IRA account and to initiate the rollover, known as a trustee-to-trustee transfer, on your behalf. There are no tax consequences to a rollover which occurs within 60 days of its origination.
- 2). Convert to a Roth IRA. If you are willing to pay your income taxes now, rather than in your retirement, you can convert your traditional IRA into a Roth IRA. Both IRA types enjoy tax-free growth of investments, but unlike with a traditional IRA, a Roth IRA enjoys tax-free distributions after the owner reaches 59 1/2. Procedurally, switching to a Roth is identical to a trustee-to-trustee transfer to a traditional IRA.
- 3). Switch to a taxable account. If you want the money out of your account, you can take it at any time, but you might face stiff tax penalties. Distributions from IRA accounts to taxable accounts are considered ordinary income and are taxed at regular income rates. Additionally, if you are under 59 1/2 at the time of the distribution--subject to special exclusions, such as the first-time purchase of a home--your distribution will also be subjected to a 10 percent penalty tax. Normally, IRAs are meant to be long-term investment vehicles, but if you need the money urgently and are willing to pay the tax penalties, you can switch your IRA to a regular taxable account.
- 4). Bequeath your account. Upon your death, your beneficiary will receive your IRA account as a beneficiary IRA. The title will be switched to your name "for the benefit of" your beneficiary. At this point, your beneficiary must follow strict rules as to distribution.
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