Two Types of Rollovers
Direct rollover: funds are moved directly from one custodian to another. The check must be made payable "Digital Trust FBO," followed by your name and/or Digital Trust account number.
Indirect rollover: also called a 60-day rollover, where you personally take possession of the funds before putting them back into an IRA within the 60-day window.
Four Key Differences Between Rollovers and Transfers
Account types: Rollovers involve moving money between different retirement account types (e.g., 401(k) to IRA), while transfers occur between identical account types (e.g., IRA to IRA).
Who initiates: Transfers are initiated by the receiving custodian, while rollovers are initiated by you with your existing custodian.
Tax reporting: Both are tax-free, but rollovers are reported to the IRS whereas transfers are not. Rollovers generate a Form 1099-R and Form 5498.
Limits: There's a limit of one indirect rollover per 12-month period, whereas there's no limit on the number of direct rollovers and transfers.
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