What Is a Direct Transfer?

A direct transfer is the movement of IRA funds or assets directly from one IRA custodian to another. Through a direct transfer, the IRA owner never takes possession of their retirement funds or assets.

The main advantage of a direct transfer is that there is no tax liability or IRS reporting with the distribution. This is because funds are transferred from one institution to another. In most cases, a direct transfer is a simpler option as it avoids having to comply with the 60 day rule and the possibility of incurring taxes and penalties.