What is a potential consequence of not adhering to the rollover timeframe of a Traditional IRA?

Not adhering to the rollover timeframe of a Traditional IRA can lead to the loss of tax benefits associated with that account. When an individual rolls over funds from one IRA to another, they have a specific period, typically 60 days, to complete the transaction without incurring tax penalties. If this timeframe is not followed, the Internal Revenue Service (IRS) may treat the funds as a distribution, subjecting it to income tax in the year it was received. Additionally, if the individual is under 59½ years of age, an early withdrawal penalty may apply, further diminishing the tax advantages that the Traditional IRA offers. Therefore, timely rollovers are critical to maintaining the tax-deferred status of the retirement savings.