The conduit IRA is a type of account that can be used to hold funds that were transferred from another retirement account. This account is commonly used when an individual is transferring funds from an employer 401k to a new employer's 401k. The money can be held in this conduit IRA until the new account is set up with the employer.

Waiting period

Many times, when starting with a new employer, you have to wait some time before you are eligible to contribute to their 401k. In the meantime, you have to have somewhere to keep your money so that you do not have to pay an early distribution penalty and pay taxes on the money.

When you have a conduit IRA, you are not eligible to contribute any more money to the account. If you put money in this type of account, it will lose its tax advantages and you will have to pay taxes on the money. Typically, you can allow the investments to continue to grow and earnings will be tax exempt. However, if you put exceed the amount, you will lose this advantage.

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