2. Avoid penalties when transferring money from one institution to another.
If you do a little rearranging of your accounts, make sure you are smart about it, otherwise you might have to pay tax on that money at the current income tax rates. Rather than withdraw your money and deposit it somewhere else, do a custodian to custodian transfer. This means the banks will transfer the money amongst themselves and you won’t have to touch the money. If you withdraw your money, you have 60 days to deposit it somewhere else, or it will be figured in with your income for the year (and you’ll be hit with the 10% penalty if you’re under 59½). This could expose you to a huge tax bill. The best solution is to avoid the problem entirely, and let the banks do all the dirty work.
