Gain Access to Your IRA Funds with an Eft Backdoor

• A rollover is when you move your money from one retirement account to another.
• It often occurs when you've left a company, changing jobs, or retiring.
• If you have money in a 401(k) or 403(b) that you'd like to invest in an IRA, you can choose a rollover or a transfer.

If you've just lost your 401(k) or 403(b)-or you're moving and you need access to your retirement funds-you have a couple of options: roll the funds into a traditional IRA, or roll them into another 401(k) or 403(b).
No matter how you access the funds, you retain full control over them. Rollovers allow you to move your retirement fund into a traditional IRA, a Roth IRA, or a 401(k) or 403(b) account with another employer.
Before deciding whether to roll your 401(k) or 403(b) assets into an IRA, you need to understand the advantages and disadvantages of each. You must also determine whether your rollover is subject to a 20% federal excise tax.

Types of efts

There are three types of efts that investors can use to move money in and out of their retirement accounts.

Traditional eft: With this type of eft, investors transfer funds into the plan, and then withdraw those assets at will.

Rollover eft: Investors can transfer assets from one type of account to another, such as from a traditional IRA to a 401(k). This eft can be initiated by the individual investor, or by their employer-sponsored retirement plan.

Direct rollover: This eft is initiated by the retirement plan, and the individual investor doesn't have to take any action.

Types of Backdoor Transactions

Backdoor transactions have been illegal since 1975, when the Employee Retirement Income Security Act (ERISA) was created. The act protects retirement account holders from having their funds misused or mismanaged, and from incurring unnecessary fees. But there are ways around this.
There are a few types of transactions, which are commonly referred to as backdoors. They are:
Rollovers

Direct transfers

Rollovers occur when funds are automatically transferred from one retirement account into another. Direct transfers occur when funds are transferred between parties by wire or check.

IRA eft Rules and Restrictions

There are restrictions to withdrawing funds from an IRA. These rules include the following:
Withdrawals cannot be made before age 59 1/2 without an early withdrawal penalty.

Withdrawals cannot be made for unqualified expenses such as gambling.

A penalty tax equal to 10%, plus an additional 5% on any amount withdrawn, is assessed if the withdrawal is not used for qualified retirement purposes.