Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

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How many rollovers are permitted in a rolling 12-month period?

One
Two
Three
Four

The correct answer is: One

In the context of individual retirement accounts (IRAs), a rollover refers to the process of transferring funds from one retirement account to another without incurring tax penalties. According to IRS regulations, individuals are permitted to complete one rollover from an IRA to another IRA within a rolling 12-month period. This rule is in place to limit the number of tax-free transfers an individual can make to prevent abuses of the rollover mechanism, ensuring that retirement assets remain in the tax-advantaged accounts intended for long-term saving. If an account holder were to attempt more than one rollover within that period, they would be subject to taxes and potentially penalties, reinforcing the importance of adhering to this guideline. As such, the limit of one rollover per rolling 12-month period is a key aspect of retirement account management and must be followed carefully to maintain the tax advantages associated with these investments.