An accrued IRA is an account that allows you to transfer funds from your previous employer-sponsored retirement plan to an IRA. With an IRA reinvestment, you can maintain the tax-deferred status of your retirement assets without paying current taxes or early withdrawal penalties at the time of transfer. Unlike 401 (k) plans, IRAs allow investing in a wide range of assets, such as stocks, bonds, exchange-traded funds (ETFs), mutual funds, and even Gold in your IRA. In an indirect reinvestment, the assets in your current account or plan are liquidated and the plan's custodian or sponsor mails you a check issued in your name or deposits the funds directly into your personal bank or brokerage account. Both an accrued IRA and a traditional IRA allow investors to save money for retirement in a tax-advantaged way, with very little difference between the two accounts.
Renewed IRAs usually occur when someone leaves a job with an employer-sponsored plan, such as a 401 (k) or 403 (b), and transfers assets from that plan to an accumulated IRA. In an accrued IRA, as in a traditional IRA, your savings grow tax-free until you withdraw the money when you retire. An accrued IRA is an IRA account created with money that is transferred from a qualified retirement plan. Renewing your IRA means you can maintain the tax-deferred status of your retirement savings while also having greater control of your investments.
The same is true if you transfer money from a traditional IRA or a standard 401 (k) to a traditional IRA. If you make an indirect reinvestment, you'll have 60 days to deposit the funds, plus the amount withheld for taxes, into your accumulated IRA. Traditional IRAs and 401 (k) contain pre-tax funds, while contributions to Roth and 401 (k) IRAs are made with after-tax money. Opening a traditional IRA and a reinvestment IRA are identical processes, the only difference is funding.
You can also have your financial institution or plan directly transfer the payment to another plan or IRA. The limit on indirect IRA-to-IRA transfers does not apply to distributions from employer-sponsored retirement plans or to transfers from traditional IRAs to Roth IRAs. You could also face a penalty for overcontributing to your IRA if you return funds to your brokerage account that don't qualify for a reinvestment. The IRS may waive the 60-day renewal requirement in certain situations if you missed the deadline due to circumstances beyond its control.
If you haven't opted for a direct renewal, in the case of a retirement plan distribution, or you haven't opted for withholding in the case of an IRA distribution, the plan administrator or IRA trustee will withhold taxes from your distribution.