Conduit IRA: Understanding Rollovers and Interim Retirement Accounts

The conduit IRA is a type of account that you might need to use at some point. Here are the basics of the conduit IRA.

Conduit IRA

The conduit IRA is a type of account that allows you to roll over funds from a qualified retirement plan. For example, if you have a 401(k) with your employer, you will need to find something to do with the funds once you leave your job. If you quit your job and do not have another employer lined up yet, you can move your retirement funds into a conduit IRA as a holding place until you find a new employer with another 401(k). At that point, you will be able to roll the funds from your conduit IRA into the new 401(k) with your new employer.

Keeping Funds Separate

You cannot put any additional money into this type of account. You need to leave the account alone and leave the funds separate from anything else. If you combine these funds with any other money, the account will lose its conduit status. At that point, you would no longer be able to take advantage of capital gains tax rates with the money in that IRA.