Most retirement account mistakes can be corrected. A few cannot, and those are the ones investors need to understand before moving money.

The biggest risks tend to come during IRA rollovers, inherited account transfers and early withdrawals. A seemingly small procedural mistake can turn what should have been a tax-free transaction into taxable income, trigger penalties or disrupt a retirement strategy that took years to build.

Here are four mistakes worth avoiding.

1. Taking Possession of an Inherited IRA

If you inherit an IRA from someone other than your spouse, the rollover rules are especially strict. A nonspouse beneficiary generally cannot receive the money personally and then redeposit it into an inherited IRA.

Instead, the assets generally need to move through a direct trustee-to-trustee transfer into an inherited IRA maintained for the beneficiary. If the custodian sends the money directly to you, the taxable portion of the distribution can become income, and the familiar 60-day rollover rule generally does not provide a second chance.

That can be particularly costly with a large inherited account, especially for beneficiaries who otherwise could spread required distributions, and the resulting tax bill, across several years.

The safer approach: Make clear to both financial institutions that you want a direct trustee-to-trustee transfer and confirm that the receiving account is properly titled as an inherited IRA.

2. Breaking the One-Rollover-Per-Year Rule

IRA owners are generally allowed only one indirect IRA-to-IRA rollover during any 12-month period. The important phrase is 12-month period because the rule is not based on the calendar year.

The limitation also generally applies across an individual’s IRAs collectively. So completing an indirect rollover late in one year does not automatically allow another rollover on January 1.

An improper second rollover can cause previously untaxed money to become taxable. If the money is deposited into another IRA anyway, it may also be treated as an excess contribution, and investors younger than 59½ could face an additional 10% tax on early distributions unless an exception applies.

The safer approach: Move IRA money directly from one financial institution to another whenever possible. Direct trustee-to-trustee transfers are not subject to the once-per-12-month rollover limitation.

3. Changing a 72(t) Withdrawal Plan

Section 72(t) can allow people younger than 59½ to take IRA withdrawals without the usual 10% additional tax by establishing a series of substantially equal periodic payments.

The benefit comes with strict rules. In general, the payment schedule must continue until the later of five years after payments begin or age 59½, and making an improper modification before then can create a significant tax problem.

Changing the withdrawal amount or making certain other changes involving the account can trigger additional taxes tied to previous distributions, along with interest. That means a mistake several years into the plan can potentially affect withdrawals that were taken much earlier.

The safer approach: One strategy is to divide retirement assets between accounts, using one IRA for the 72(t) plan while leaving another IRA outside the arrangement for greater flexibility. Because the IRS allows certain limited exceptions and permitted changes, anyone considering modifying an existing 72(t) plan should verify the rules before making the move.

4. Rolling Over the Wrong Property

Indirect rollovers involving securities carry another easily overlooked rule: when property is distributed from an IRA, the same property generally must be contributed to the receiving IRA for the transaction to qualify as a tax-free rollover.

For example, suppose an investor receives shares of stock from an IRA distribution. Selling those shares and depositing unrelated cash or different securities into another IRA generally does not satisfy the same-property requirement.

The result can be a failed rollover, making the original distribution taxable and potentially exposing the investor to an additional early-distribution tax. The deposit into the new IRA could also create an excess contribution issue.

The safer approach: If securities are being moved, avoid selling or swapping them during an indirect rollover. Better yet, use a direct trustee-to-trustee transfer when possible.

The Common Thread

All four mistakes share one important characteristic: the risk rises when retirement assets pass through the account owner’s hands.

Direct transfers between financial institutions avoid many of the problems created by indirect rollovers. They can eliminate the 60-day deadline, avoid the once-per-year rollover restriction and reduce the chance of making a mistake involving inherited accounts or securities.

For investors with substantial retirement balances, getting the mechanics right can matter just as much as choosing the investments inside the account. A paperwork error involving a six-figure IRA can create a far larger financial problem than a bad week in the stock market.

Before Moving Retirement Money

Before transferring a large IRA, inherited retirement account or 72(t) account, confirm exactly how the transaction will be handled and classified for tax purposes.

The practical rule is simple: when a direct transfer is available, it is usually the cleaner route. With retirement accounts, understanding the rules before the money moves is far easier than trying to repair a transaction afterward.