South Carolina Insurance Practice Exam

How many days does a Traditional IRA have to be rolled over to another IRA to avoid tax consequences?

1. 30 days

2. 60 days

3. 90 days

4. 120 days

The correct answer is: 60 days

To avoid tax consequences when rolling over assets from a Traditional IRA to another IRA, the rollover must be completed within a 60-day period. This timeframe is crucial because it gives individuals a clear window in which they can transfer their funds without triggering income tax liabilities or early withdrawal penalties. If the rollover is not completed within this 60-day period, the distribution may be treated as a taxable event, and if the individual is below the age of 59½, they may also incur an additional 10% early withdrawal penalty. Familiarity with the rules surrounding rollovers is essential for anyone managing their retirement accounts, as this knowledge helps in maintaining the tax-advantaged status of these accounts while planning for future financial needs. The incorrect options reflect timeframes that do not align with IRS regulations concerning IRA rollovers.