Have you decided it's time to bid farewell to your Merrill Edge Roth IRA? Whether you're consolidating accounts, seeking new investment opportunities, or simply simplifying your financial life, closing a Roth IRA requires careful attention to detail to avoid unexpected taxes or penalties. This comprehensive guide will walk you through every step of the process, ensuring a smooth and compliant closure.
Let's dive in!
Step 1: Understand Your "Why" and Your "What"
Before you even think about picking up the phone or filling out a form, take a moment to understand why you're closing your Merrill Edge Roth IRA and what you intend to do with the assets. This initial reflection will heavily influence the path you take.
Sub-heading: Why are you closing it?
Consolidating Accounts? Perhaps you're moving all your retirement savings to a single brokerage for easier management or better fee structures.
Changing Brokers? Maybe you've found another platform that better suits your investment style or offers features Merrill Edge doesn't.
Need the Funds? While generally not advisable for retirement accounts, you might have an urgent financial need. Be aware: Roth IRA contributions can be withdrawn tax-free and penalty-free at any time, but earnings may be subject to taxes and penalties if you don't meet qualified distribution rules (generally age 59½ and a 5-year holding period).
Dissatisfied with Merrill Edge? Customer service, fees, or investment options could be factors.
Sub-heading: What do you want to do with the assets?
This is crucial. You generally have two main options:
Transfer the assets to another Roth IRA at a different institution. This is often the most common and tax-efficient method. It's called a direct rollover or a trustee-to-trustee transfer.
Liquidate the assets and withdraw the cash. This option has potential tax and penalty implications, especially for earnings, if you don't meet specific IRS requirements.
Your decision here will dictate the subsequent steps.
Step 2: Contact Merrill Edge and Your New Custodian (If Transferring)
Communication is key when closing any financial account.
Sub-heading: Contacting Merrill Edge
Gather your account information: Have your Merrill Edge Roth IRA account number readily available.
Call Merrill Edge Customer Service: The most direct way to initiate the process or get specific instructions is to call them. You can find their contact numbers on the Merrill Edge website, typically in the "Contact Us" or "Help & Support" sections. Look for numbers related to Self-Directed Investing or Advisory Center.
Merrill Edge Self-Directed Investing: 1.877.653.4732
Merrill Edge Advisory Center: 1.888.654.6837
Explain your intention: Clearly state that you wish to close your Roth IRA. If you're transferring, mention that.
Inquire about specific forms or procedures: Ask if there are any specific forms you need to fill out for closure or transfer. They may direct you to their online forms library.
Ask about any fees: Merrill Edge may charge a closing fee, especially if your account balance is below a certain threshold. It's reported that a $100 processing fee may be charged for each account closure or transfer of account assets to another firm for clients who hold less than $5 million in qualifying assets. Confirm any applicable fees directly with Merrill Edge.
Sub-heading: Contacting Your New Custodian (for Transfers)
If you're transferring your Roth IRA, the receiving institution will typically initiate the transfer process.
Open a new Roth IRA: Before contacting Merrill Edge, you should have already opened a new Roth IRA account at your chosen new brokerage. Ensure the account is the exact same type (Roth IRA to Roth IRA) to avoid tax complications.
Inform your new custodian: Let them know you intend to transfer your Merrill Edge Roth IRA to them. They will usually provide you with the necessary forms (often called "Transfer of Assets" or "TOA" forms) and guide you through their specific process.
Provide Merrill Edge account details: Your new custodian will need your Merrill Edge account number and other relevant information to facilitate the transfer.
Step 3: Address Your Investments – Liquidation or In-Kind Transfer
This is a critical step that determines how your assets move.
Sub-heading: Option A: Liquidate Assets and Withdraw Cash (Not Recommended for Transfers)
If you're simply closing the account and taking the cash, you'll need to sell all your investments.
Sell all securities: This includes stocks, ETFs, mutual funds, bonds, etc. Be mindful of market volatility during this period.
Understand tax implications of withdrawals:
Contributions: You can generally withdraw your Roth IRA contributions tax-free and penalty-free at any time, regardless of your age or how long the account has been open.
Earnings: Withdrawals of earnings are typically tax-free and penalty-free only if they are "qualified distributions." This means:
You are at least 59½ years old, and
The Roth IRA has been open for at least five tax years (the "5-year rule").
There are also exceptions for certain situations like disability, first-time home purchase (up to $10,000), or for a birth/adoption.
If you withdraw earnings and don't meet these criteria, the earnings will be subject to ordinary income tax and a 10% early withdrawal penalty. Consult a tax professional before making significant withdrawals of earnings to fully understand your personal tax liability.
Withdraw the cash: Once your investments are liquidated, you can request a cash distribution. This might be via a check or an electronic transfer to a linked bank account.
Sub-heading: Option B: Transfer Assets In-Kind (Recommended for Transfers)
This is generally the preferred method when moving your Roth IRA to another institution as it keeps your investments intact and avoids potential taxable events.
Verify transferability: Your new custodian will confirm if all your existing Merrill Edge investments can be transferred "in-kind" (meaning the actual shares/units are moved, not liquidated). Some proprietary funds or less common securities might not be transferable and would need to be liquidated at Merrill Edge before the transfer. Your new custodian will inform you if this is the case.
Complete the Transfer of Assets (TOA) form: Your new custodian will provide this form. You'll need to fill it out accurately with your Merrill Edge account details and the new account details.
Submit to the new custodian: Your new custodian will then send the TOA request to Merrill Edge. They handle the communication and coordination between the two institutions.
Monitor the transfer: Keep an eye on your accounts. Direct transfers typically take 5-7 business days, but can sometimes take longer. Avoid making any trades or contributions to the Merrill Edge account during the transfer process as this can complicate or delay it.
Step 4: Confirm Account Balance and Address Any Outstanding Items
Before the final closure, ensure everything is squared away.
Sub-heading: Zero Out Your Balance
Sell remaining fractional shares: If you had an in-kind transfer, there might be small cash balances or fractional shares left behind. You'll need to ensure these are either transferred or withdrawn.
Account for dividends/interest: Check if any dividends or interest payments are pending. These will need to be distributed or transferred before closure.
Check for outstanding trades: Make sure no trades are pending or unsettled.
Sub-heading: Close Open Positions (if not transferring in-kind)
As mentioned in Step 3, if you're liquidating, ensure all your positions are closed and converted to cash.
Sub-heading: Final Statement and Confirmation
Request a final statement from Merrill Edge after the transfer or withdrawal is complete. This statement should show a zero balance.
Confirm with Merrill Edge directly that the account is officially closed. Ask for a written confirmation or confirmation number if possible.
Step 5: Review Tax Implications and Documentation
Even with Roth IRAs, documentation is important.
Sub-heading: Keep Records
Maintain all transfer or withdrawal paperwork: This includes any forms, correspondence with Merrill Edge and your new custodian, and confirmation statements.
Tax forms: While Roth IRA qualified distributions are generally tax-free, Merrill Edge will still issue a Form 1099-R if you take a distribution, even if it's a tax-free return of contributions. Keep this for your records. If you had any non-qualified withdrawals, you'll need this form for tax filing.
Sub-heading: Consult a Tax Advisor
This cannot be stressed enough. If you are unsure about any tax implications, especially concerning withdrawals of earnings or complex transfer scenarios, always consult a qualified tax advisor or financial planner. They can provide personalized advice based on your unique financial situation.
10 Related FAQ Questions
How to initiate a direct rollover from Merrill Edge to another Roth IRA?
You typically initiate a direct rollover by opening a new Roth IRA account at your chosen receiving institution, and then that institution will provide you with the necessary "Transfer of Assets" (TOA) forms to transfer your Merrill Edge Roth IRA to them. They will handle the communication with Merrill Edge.
How to withdraw cash from a Merrill Edge Roth IRA account?
To withdraw cash, you first need to sell all investments within the Roth IRA. Once the funds are in cash, you can typically request a withdrawal via electronic transfer to a linked bank account or by requesting a check, usually through their online platform or by contacting customer service.
How to avoid penalties when closing a Merrill Edge Roth IRA?
To avoid penalties, especially on earnings, ensure any withdrawals are "qualified distributions" (generally, after age 59½ and the account has been open for 5 tax years). If transferring, opt for a direct rollover to avoid taxable events. Contributions can always be withdrawn tax and penalty-free.
How to find Merrill Edge's customer service number for Roth IRA account inquiries?
You can find Merrill Edge's customer service numbers on their official website, typically under the "Contact Us" or "Help & Support" sections. Look for numbers specific to "Self-Directed Investing" or "Advisory Center" for IRA-related questions.
How to check for fees associated with closing a Merrill Edge Roth IRA?
Contact Merrill Edge customer service directly and ask about any account closure or transfer-out fees. These fees may apply, especially for accounts with balances below a certain threshold.
How to determine if my Roth IRA assets can be transferred in-kind to another brokerage?
Your new brokerage firm will be able to confirm which of your specific Merrill Edge investments can be transferred in-kind. Some proprietary funds or less common securities might need to be liquidated first.
How to get a final statement after closing my Merrill Edge Roth IRA?
You can typically request a final statement from Merrill Edge through your online account portal or by contacting their customer service after the closure or transfer is complete. This statement should show a zero balance.
How to handle fractional shares when closing a Merrill Edge Roth IRA?
If you have fractional shares after an in-kind transfer, Merrill Edge will usually liquidate these small portions and distribute the cash to you, or you can request they be transferred as cash to your new account if your new custodian accepts them.
How to know if my Roth IRA withdrawal is a "qualified distribution"?
A qualified distribution from a Roth IRA is generally one taken after you reach age 59½ AND at least five tax years have passed since the first contribution to any Roth IRA. Exceptions also exist for disability, first-time home purchases, or birth/adoption expenses.
How to report a closed Merrill Edge Roth IRA on my taxes?
Even if a Roth IRA distribution is tax-free, Merrill Edge will issue a Form 1099-R for any distributions. You should keep this form for your tax records. If you had non-qualified withdrawals of earnings, you would report those on your tax return. Always consult a tax professional for specific tax filing advice.
