• IRA BLOG

  • By Andy Ives, CFP®, AIF® IRA Analyst After a recent Ed Slott conference in Dallas, Texas, I found myself sitting in a hotel café, surrounded by travel bags, having pizza with a few meeting attendees with later flights. “Anyone want to share an Uber to the airport?” asked a lunch guest. “Sure,” I said. “I’ll join you.” After all, the Uber was already ordered, and I am always[...]

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    By Sarah Brenner, JD IRA Analyst If you are planning on doing a 60-day rollover with your IRA funds, be sure you understand same-property rule. This is one of the lesser known rules that apply to rollovers and is one many taxpayers find confusing. For IRA-to-IRA or Roth-to-Roth 60-day rollovers, the same property received is the property that must be rolled over. These rules also apply to [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: I recently inherited a traditional IRA from my mother. I mistakenly asked for a lump sum to be paid to me by the custodian. I realized after the fact that I wanted to set up a stretch IRA. I haven’t cashed the check yet. Can I just return it or have them stop payment on the check and change my option to an inherited beneficiary IRA? [...]

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    By Sarah Brenner, JD IRA Analyst With college costs almost certain to keep increasing each year, parents need to explore every possible tool available to meet the challenge of paying for higher education. Roth IRAs are not just for retirement savings. They can play a vital role in education savings. However, the rules can be tricky. Before you take a distribution from your Roth IRA to pay that[...]

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    ROTH IRA: TWO CLOCKS

    May 13, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst Roth IRAs are extremely popular, and why wouldn’t they be? Tax-free earnings over a lifetime can add up to a serious chunk of change. However, in order to receive those tax-free earnings, rules must be followed and timeframes must be met. Despite the ubiquity of Roth IRAs, there is confusion around what those rules and timeframes are. In order to [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Question: Good morning, We have a client that retired on 1/2/2019 and he was over 70.5.  He was not required to take his RMD in 2018 from his 401k since he was still working (he did take his 2018 RMD from his IRA).  He rolled that 401k into his IRA this year (which was allowed in his plan since he retired in 2019), so we are trying to determine [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst To discourage early access to amounts invested in IRAs and company retirement plans, the IRS imposes a 10% early distribution penalty on withdrawals before age 59 ½. Even though Roth IRAs consist of after-tax contributions, the penalty could also apply to converted amounts or earnings. There are several exceptions to the 10% early distribution penalty, [...]

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    By Sarah Brenner, JD IRA Analyst In the wake of tax reform, more IRA owners are making use of the Qualified Charitable Distribution (QCD) strategy. This is a side effect of fewer people choosing to itemize and instead going with the larger standard deduction. If you are not itemizing, you cannot claim a tax deduction for your charitable contribution. To get a tax break for money given to [...]

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    By Sarah Brenner, JD IRA Analyst In the wake of tax reform, more IRA owners are making use of the Qualified Charitable Distribution (QCD) strategy. This is a side effect of fewer people choosing to itemize and instead going with the larger standard deduction. If you are not itemizing, you cannot claim a tax deduction for your charitable contribution. To get a tax break for money given to [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Net Unrealized Appreciation (“NUA”) is a powerful tool that people with employer stock in company plans should be aware of. Under this tax concept, the gains on the employer stock that are distributed according to the NUA rules are subject to long term capital gains rates when sold. That could be a huge tax break for some people. Normally, [...]

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    By Sarah Brenner, JD IRA Analyst Question: My sister is 72 years old and quite philanthropic. Much of her traditional IRA RMD she donates to various charities. Is it possible for her to instruct the IRA trustee to send the money directly from her IRA account to the charities? How will the charities acknowledge receipt from my sister so she can deduct the donations on her taxes? Is she[...]

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    By Sarah Brenner, JD IRA Analyst The House Ways and Means Committee recently passed the Setting Every Community Up for Retirement Enhancement Act of 2019 (the SECURE Act). This bill includes a number of measures designed to strengthen retirement savings. With regard to IRAs, the bill would treat certain taxable non-tuition fellowship and stipend payments as compensation for purposes of [...]

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    DOUBLE BROCCOLI VS. IRD

    April 22, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst My son does not much care for broccoli. However, he knows it is for the greater good, and I insist he grow strong and healthy. As long as he lives under my roof, I could feed him broccoli for both lunch and dinner. Double broccoli is legal. But we both agree that would be excessively penal. The boy knows that if he eats broccoli for lunch, it will not be [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Question: First, thank you for the educational opportunity via the mailbag services. I'm 70 years old (will be 70 1/2 in July this year). I retired in 2014.  I have a 401K account (consisting of highly appreciated stocks and cash) with my former employer. Although the majority of the money is pre-taxed, I do have a small portion of the money in [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst If the dictionary had pictures next to each word, the U.S. Tax Code would fit nicely next to the definition of “esoteric.” But as we all know, this complex web of rules and regulations cannot be ignored. Mistakes cost money, in the form of extra taxes, penalties, and interest. Some mistakes can be fixed, but not all. Even those that can be fixed may [...]

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    By Sarah Brenner, JD IRA Analyst Today is April 15, 2019. This is deadline for filing your 2018 federal income tax return, unless you have an extension. This tax season was the first one where we saw the impact of the Tax Cuts and Jobs Act. Wholesale changes to the tax code made this a more interesting and unpredictable tax season than usual. Many taxpayers had lots of uncertainty about what [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: Hello, I have a question for a situation I have never come across before.  I have a client that just found out they missed taking their RMD’s from one of their retirement accounts for the last 5 years!  Assuming they take the missed distributions in March 2019, what form will the broker report this on?  Will it be a Form 1099-R for [...]

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    SUNK BY A ROLLOVER

    April 10, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst Unfortunately, it happened again. Another person dove into the IRA rollover pool before checking the depth, temperature, or if the pool was even open for swimming. In this scenario, $125,000 was rolled from an IRA at Bank A to Bank B. A few months later, in a constant search for a higher paying certificate of deposit, the account owner rolled the same [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Most people are aware of the tax concept, Required Minimum Distributions or “RMDs.” These are the tax rules that force you to take a distribution from your IRA or qualified plan, even when you don’t want to. Moreover, that distribution is usually taxable, and it cannot be rolled over! The calculation is always the same: you divide the account [...]

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    By Sarah Brenner, JD IRA Analyst Question: I have a 60 day rollover, and basically the client has what I believe is an uneducated tax preparer. The roll over occurred within the proper 60 days, the custodian sent out the 1099R as a distribution checking box 7, 1, because even they sent the check directly to the new custodian they did not receive a letter of acceptance, so they considered it[...]

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    By Sarah Brenner, JD IRA Analyst Are you a small business owner or a sole proprietor? If so, you may use a Simplified Employee Pension (SEP) IRA plan to save for retirement. These plans are a popular choice for small businesses because they are inexpensive and easier to administer than other retirement plans. While SEPs are pretty straight forward, there are some rules that may surprise you[...]

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    By Andy Ives, CFP®, AIF® IRA Analyst A little house on Easy Street has one front door. It is a traditional IRA. There is a sign above the lone entry point the reads, “To All Those That Enter, Thy Earnings Will be Taxable.” It does not matter if the money that enters through the front door is a contribution or rollover or transfer. Most of the arriving dollars, and all of the earnings on [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Question: Planning Question - for retirement plans that permit Non Roth After Tax Contributions, could the company use Qualified Matching Contributions (QMACs) for the NHCEs to satisfy the ADP & ACP testing allowing the HCEs to max out their 415(c) ceiling above their own deferrals and company match contribution? Or, is there a better way for [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Tax rules can be confusing, and that can especially be the case when we are talking about the application of two separate rules. It’s easy to get confused when two or more tax laws intersect. For many, that occurs when we discuss the separate account rules for IRA beneficiaries along with the special rollover rules afforded to spousal beneficiaries. [...]

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    Are you ready for the Great Wealth Transfer? By some reports, 45 million Baby Boomers are expected to transfer over $68 trillion in wealth to the next generation in the coming 25 years. Increasingly, a larger portion of this wealth can be found in IRAs. Those dollars in motion represent an opportunity for proactive advisors who know how to move retirement assets to heirs in the correct and most [...]

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    By Sarah Brenner, JD IRA Analyst Whether by choice or necessity, many Americans are still working long beyond what has traditionally been retirement age. If you are a member of this group, you may be keeping funds in your employer plan well into your seventies and maybe even later. There are some big benefits to extending a career. You can continue to contribute to your retirement account and [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: Is it possible to take the RMD portion of an inherited traditional IRA and convert that each year as the distribution is done into a Roth IRA?  Or, is the only way to accomplish this is to take the distribution and then make a contribution, which limits the amount I can put in each year? Thanks, Lynn Answer: Lynn, No, RMDs [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Edward was born in 1950. Traditional IRA accounts would not be established until the Employee Retirement Income Security Act of 1974 (ERISA). In 1975, Edward and many other Americans took full advantage of this tax-deferred savings opportunity. The maximum contribution limit in 1975 was $1,500, and Edward contributed the full amount to his IRA every year.[...]

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    By Jeremy Rodriguez, JD IRA Analyst I’m sure you’ve heard countless advisors mention that a direct transfer (or direct rollover) is the best way to move funds between IRAs or qualified retirement plans. But do you understand why? There are a number of reasons, and in this installment, we discuss some of those in greater depth. Background: Direct Transfer vs. 60-day Rollovers It is [...]

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    By Sarah Brenner, JD IRA Analyst Question: I have a question about avoiding RMDs for a still-working 72 year old in a 401k plan.  Suppose they don’t have to take 401k RMDs due to the still-working exemption from RMDs.  Let’s say the person knows they will retire next year in February 2020 when they will be 73.  If they do an IRA rollover while still employed in January 2020, would [...]

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    By Sarah Brenner, JD IRA Analyst It’s that time of year again. Tax season is upon us. This is now the time when many individuals consider funding their IRAs. Contributing to an IRA may seem pretty straight forward and in many ways it is! But there can be twists. Here are five IRA contribution rules that may surprise you. 1. File now and fund later: Frequently, during tax season we are [...]

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    THE DISCLAIMER

    March 11, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst A disclaimer is an interesting tool. It is a denial or disavowal of legal claim, or a formal refusal to accept an interest in something. “Release” and “waiver” are good synonyms. Oftentimes a disclaimer statement is used by a person looking to shield themselves from legal repercussions. A shady politician might disclaim any responsibility or [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Question: My Daughter is a 30-year old RN and I want to help her contribute to an IRA.  She has a 401K at the hospital where she works, but she only contributes to maximize their 4% matching.  It is my understanding she can still contribute (up until April 15th, 2019) $5,500 to either a 2018 ROTH or a 2018 traditional IRA.  At her age, the growth [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst When a legal question is clear, I like to imagine the landscape like the great plains of the midwestern United States.  The land is flat and lush, meaning problems are easily identified and the area can be easily traversed. On the other hand, when the question isn’t so clear, the terrain reminds me of the moon; rocky, dark, desolate, and full of [...]

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    By Sarah Brenner, JD IRA Analyst Much attention is paid to the favorable options available when spouses are named as IRA beneficiaries. However, a significant portion of IRA assets will end up being inherited by individuals who are not a spouse of the decedent. Many people name siblings, friends, children or others as their IRA beneficiaries. Also, IRA assets that start off with spouse [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Question: Hello, I am a CPA and was not sure if in 2019 alimony was considered earned income for making a Roth IRA contribution. Would appreciate any clarification you can provide. Thank you very much. Have a great day! Dale Answer: Dale, This issue was one of the changes enacted under the Tax Cuts and Jobs Act. Under the old [...]

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    IVAN SEEKS ADVICE

    February 27, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst Ivan is an inventor at heart, but he is stuck in an office at a job he does not particularly care for. Ivan constantly daydreams about starting his own company and improving everyday life with his inventions. For 20 years Ivan funds his 401(k) and tinkers with his creations when he gets home from work. With a burst of inspiration, Ivan invents the [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: In 2017, I opened a Roth IRA through my company. Being over 65, I mistakenly thought I could convert Traditional IRA funds to the Roth if I paid tax on the rollover amount. In August 2018, I had Schwab roll $50,000 into my Roth from my traditional IRA. This month (February 2019) when doing my 2018 taxes, I realized that conversions are not [...]

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    “GAP ANALYSIS”

    February 18, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst There are many gaps. Generation gap, stop-gap, The Gap Band. In baseball you can hit into the gap. Football linemen have an A-gap, B-gap and C-gap to concern themselves with. Of course, there is the Cumberland Gap. And there is a very important gap to consider when dealing with IRAs – the “Gap Period.” The gap period begins on the date of death [...]

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    By Sarah Brenner, JD IRA Analyst Question: If I convert Trad IRA funds to a Roth IRA, does the ratio of After-Tax Contribution to Total IRA holdings include 401k holdings or only IRA holdings. I am a recently retired pilot and want to make Trad to Roth IRA conversions this year and in the next four or five years before I’m required to begin RMDs. I have about $80k in after-tax Trad IRA[...]

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    By Sarah Brenner, JD IRA Analyst If you have an IRA, you may have heard the term “required beginning date” or “RBD.” This is an important date that every IRA owner should understand. The significance of the RBD is not limited to IRA owners. It is a critical date for IRA beneficiaries as well. Here are 10 things you need know about the RBD: The RBD for an IRA owner is the date by [...]

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    By Jeremy Rodriguez, JD IRA Analyst Question: Hello Ed, I have an elderly client in his 80’s, not in the best of health. He has named his spouse (also in her 80’s) along with his 4 children as primary beneficiaries of his IRA. That said, I know the 4 children will have to establish inherited IRA’s – and keep them in such an account forever, receiving RMD’s at the single life [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst When it comes to 401(k) plans, I feel like the Johnny Cash lyric…“I’ve been everywhere, man.” I’ve wholesaled record keeping platforms to financial advisors and sold direct to business owners. I’ve taught novice investors about their mutual fund options and crawled through the weeds of 401(k) plan design with CPAs. I’ve helped enroll [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst So, you want to invest your IRA money in real estate? Every so often we get this question from advisors wondering what they should look out for. Under the tax code, real estate is a permissible investment for IRAs. However, that doesn’t mean it doesn’t carry its own concerns which should cause you to think twice before jumping in. Below are some [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: Client passed in the middle of December 2018, but did not take her RMD.  We are setting up beneficiary IRA accounts.  We will be moving assets over to the beneficiary IRA accounts and then the beneficiary will take the RMD distribution. Should they take the 2018 distribution that was due and then take an additional distribution during 2019 [...]

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    DISABILITY – A HIGH HURDLE

    January 28, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst There are a number of ways an individual can avoid the 10% early withdrawal penalty from their IRA or employer work plan. Some exceptions apply specifically to IRAs (i.e. higher education; first-time home buyer, etc.) and others pertain only to company plans (for example, the age-55 exception and qualified domestic relations orders, among others). As long[...]

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    By Sarah Brenner, JD IRA Analyst Question: Hi I have a question about 72t "If" I am 45 years old, and calculate the amount to withdraw from my ira under 72t via the RMD method, I understand that I must continue calculating the withdrawal via the RMD method every year until I am 59 1/2 years old.  But Now what???  My question is- once I am 59 1/2, can I stop withdrawing from my ira [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Mistakes happen, and when dealing with complicated rules like the U.S. tax code, they aren’t exactly uncommon. Thankfully, the IRS has numerous ways various mistakes can be corrected, and one of the most lenient processes is for missed required minimum distributions (“RMDs”). To say that the missed RMD penalty is stiff (i.e., 50% of the missed [...]

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    KONMARI YOUR IRA

    January 21, 2019

    By Sarah Brenner, JD IRA Analyst Marie Kondo is a decluttering and tidying expert from Japan. She has a new show on Netflix, Tidying Up with Marie Kondo, that is a huge hit. Thrift shops around the country are reporting a large influx of donations as Americans reevaluate their homes and tidy up using the “KonMari” method. While your retirement accounts may be a little different than your [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Question: I am in the process of setting up a QTIP because my current wife (age 64) is not the mother of my 2 children (ages 41 and 38).  If I pre-decease, the IRA will go to my wife within the trust. When she passes and the IRA is inherited by my children, will the RMDs be based on my wife's age when she passed or will they be based on the ages of my [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Question: I am in the process of setting up a QTIP because my current wife (age 64) is not the mother of my 2 children (ages 41 and 38).  If I pre-decease, the IRA will go to my wife within the trust. When she passes and the IRA is inherited by my children, will the RMDs be based on my wife's age when she passed or will they be based on the ages of my [...]

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    PROHIBITED TRANSACTIONS

    January 16, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst If I decide to climb on the roof of my house and try to ride a unicycle while blindfolded, it is not illegal. Dangerous, yes, but not in violation of any laws. If I elect to randomly jump off a bridge under the guidance of the Usually Successful Bungee Jump Company, it is my prerogative. Again, not against the law, but potentially destructive. And [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst In my last installment, I talked about one of my two favorite beginning of the year topics when it comes to retirement planning: New Year’s Resolutions (https://www.irahelp.com/slottreport/easy-new-year’s-resolutions-your-retirement). Here, I want to talk about the second topic, the most important laws, regulations, rulings, and decisions from 2018 that[...]

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    By Sarah Brenner, JD IRA Analyst Question: Dear Ed, Thanks for all your work on the retirement frontier.  I have a question…we have married clients who are age 70 (he) and 62 (she).  Both clients have IRAs.  The 62-year-old client just passed away.  I know that the surviving spouse can rollover the decedent’s IRA into his IRA and the RMDs will begin (on the combined funds’ [...]

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    DEEMED

    January 9, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst A word we don’t see much in daily conversation is “deem.” I imagine a sweeping proclamation made by an authority figure from an ivory tower: “It is deemed that the third day of the standard workweek shall henceforth be called ‘Wacky Wednesday.’” While working “deem” into a sentence among friends can be tough, and you might get some [...]

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    By Sarah Brenner, JD IRA Analyst Roth IRAs offer a trade-off. You decide to pay taxes now on your contribution (or conversion) in exchange for tax-free earnings down the road. Don’t miss out on Roth IRA benefits by making mistakes when you take a distribution. Here are six rules you need to know to make sure money comes out of your Roth IRA tax-free. 1. Aggregate your Roth IRAs. For tax [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: Hi Mr. Slott: I turn 70 ½ years old this year (D.O.B. 5-28-49) and must commence RMDs for an IRA total asset value as of 12/31/2018.  When do I have to report this RMD on my tax return - before or no later than 4/15/2019?  I have all my IRA funds with one custodian. Do they calculate the RMD or do I have to calculate?  Also, my spouse [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst When it comes to tax law and retirement planning, there are two things I like to talk about at the beginning of a new year: (1) some of most important rulings issued and laws passed in the prior year; and (2) the steps you can take today to improve your savings for retirement in the future. Since the topic du jour has been New Year’s resolutions, I want [...]

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    By Beverly DeVeny IRA Analyst Question: I am 64 and opened my only Roth IRA over 5 yrs ago. I originally contributed $32.5K ($6.5K for 5 yrs) to this Roth IRA but now find it at $22.5K in value. Can I close this account and take a $10K capital loss? Kaptain Kurt Answer: The option to deduct losses in an IRA or Roth IRA is no longer available. Before the Tax Cuts and Jobs Act [...]

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    HAPPY HOLIDAYS!

    December 24, 2018

    By Sarah Brenner, JD IRA Analyst Happy holidays from Slott Report! We would like to wish all of our readers and their families a joyous holiday season and a Happy New Year! Thank you for taking your valuable time to read the Slott Report in 2018. Throughout the year we have heard from many of you. We welcome your questions and input. Keep it coming! The end of the year is always a time [...]

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    By Sarah Brenner, JD IRA Analyst Question: Hello IRAHelp, I have a copy of Your Complete Retirement Planning Road Map and find it to be an extremely useful resource.  I have uncertainty regarding optimum means for funding a Health Savings Account (HSA).  I am 61.  In 2018, I made a one-time Qualified HSA Funding Distribution (QHFD).  I’ve utilized high deductible health plans [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst In mid-November 2018, the IRS issued proposed regulations altering some of the rules governing hardship distributions from 401(k) and 403(b) plans. Most of the rules weren’t new; instead the IRS adopted changes that were issued in previous pieces of legislation, such as the Tax Cuts and Jobs Act, the Bipartisan Budget Act of 2018, and the Disaster Tax [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Jerry sells widgets for the ACME Widget Company. Jerry is a hard-working employee who participates in the ACME Widget Company 401(k) Plan. Jerry also contributes annually to an IRA account at a local bank. The widget business is a fickle one. Some years Jerry can make up to $200,000, while in the down years he might only make $50,000. When Jerry’s [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Question: Hello Mr. Slott, Thanks for your educational broadcasts. I have run into something that might hold your interest. In two separate situations I have asked that retirement checks be made payable to an IRA at another large institution mailed FBO “my name” then mailed to me. One is IRA to IRA, the other is Qualified retirement plan by a [...]

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    ILLIQUID ASSETS AND IRA RMDS

    December 12, 2018

    By Beverly DeVeny IRA Analyst I get the same question every year at year end. “My client has an illiquid IRA and can’t take his RMD. Can we just write a note to IRS explaining the problem?” Every year my answer is the same. “NO.” What is an RMD? It is a required minimum distribution. What does required mean? From dictionary.com: “to call for or exact as obligatory; ordain: [...]

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    By Sarah Brenner, JD IRA Analyst If you are considering converting an IRA to a Roth IRA in 2018, time is quickly running out. Here are 5 things you need to know when making a decision: 1. The Deadline - The deadline for a 2018 conversion is the end of the calendar year. There is a common misconception that a conversion can be done up to the client’s tax-filing deadline. That is NOT the [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: Mr. Slott, My spouse turned 70 on June 27th, 2018, so in December 2018 she will be 70 ½. She would like to complete a Qualified Charitable Distribution (QCD). Does the QCD need to be dated from December 27 to December 31, 2018 in order to take advantage of the favorable tax treatment for tax year 2018?  Or, does she have all of calendar [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst One piece of advice we commonly reiterate is, when you inherit an IRA or other retirement plan asset, touch nothing! That’s because many transactions cannot be undone, and the IRS rarely grants relief simply because the taxpayer misunderstood the tax rules. That said, you don’t want to remain stagnant forever. We were reminded of this in a recent [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst It turns out the Grinch stirs up a blizzard of trouble beyond stealing Christmas trees and presents from the innocent Whos down in Whoville. That candy cane he slipped out of Cindy Lou’s fingers? Child’s play. The breadcrumb he stole from the hungry Who mouse? Just the tip of his naughty iceberg of misdeeds and bad retirement advice. He’s an [...]

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    By Sarah Brenner, JD IRA Analyst Question: Good morning! I am hoping you can provide some direction for an issue we have encountered. In December of 2016, we changed our broker-dealer. A particular client had not completed the transfer paperwork and had to mail a check to the IRA custodian directly for their 2016 contribution. The client had mailed the check prior to April 18, 2017, [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Twenty-six states have adopted revocation-on-divorce statutes similar to each other, and these statutes are impacting court decisions. Example #1: The U.S. Supreme Court, in an 8 – 1 ruling just this past June, concluded that life insurance proceeds would NOT go to an ex-spouse, even though she remained the beneficiary named on the beneficiary form [...]

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    By Sarah Brenner, JD IRA Analyst If you are thinking about doing a qualified charitable distribution (QCD) for 2018, time is running out. The deadline is December 31, 2018. Many people are missing out on this valuable tax break. If you are both taking required minimum distributions (RMDs) from your IRA and giving to charity in 2018, a QCD is something you should explore. Here are 10 things [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Tim and Robert are identical twins. They wear the same clothes. They have similar hair styles. They have similar jobs and similar incomes. Tim and Robert are both concerned about taxes, and they agree that saving money for the future is very important. It can be difficult to tell them apart. Where Tim and Robert differ is in their attitudes toward [...]

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    By Sarah Brenner, JD IRA Analyst Thanksgiving is only a few days away. This is a time when we gather together and express our gratitude for all the good things in our lives. When it comes to our retirement accounts, we too often complain about the negatives, such as the restrictions that are not logical and the complicated and confusing rules. To celebrate Thanksgiving, let’s change it up [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: I am 70 ½ and still working in 2018.  If I work part time (still employed) in 2019, can I delay my 401K RMD until 2020? Best regards, Will Answer: Will, If you are still employed by the company that is offering the 401(k) in 2019, and if you do not own 5% or more of that company, then yes, you can delay your RMD from that [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst There is a 131-page bill currently working its way through the U.S. legislature. The proposal would amend the Internal Revenue Code and encourage retirement savings. While the “Retirement Enhancement and Savings Act of 2018,” or RESA, still needs to make it through Congress – potentially before year end – it has strong tailwinds. RESA [...]

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    By Sarah Brenner, JD IRA Analyst The road to retirement is long. Along the way you may need to move the funds in your IRA. When that time comes, you will want to be sure that everything is done correctly. Moving your retirement funds can be tricky and the consequences of a mistake can be serious. Rollover Rules If you decide to move your funds to another IRA by doing a rollover, there [...]

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    By Sarah Brenner, JD IRA Analyst Question: Dear Ed Slott team members, Would you please address the following scenario. You bought stock in an IRA for a $1000. Ten years later, it has appreciated to $10,000. If the stock was not in an IRA, you would owe capital gains tax on the gain of $9,000. My 1'st question is this - because the stock IS in an IRA, how is the capital gain tax[...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Like other accounts, distributions from IRAs of basis comes out tax-free. In this setting, basis would include both nondeductible IRA contributions and after-tax funds rolled over from company plans. While after-tax funds in an employer plan can be rolled over to a traditional IRA, it doesn’t occur very often since the release of IRS Notice 2014-54. [...]

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    By Beverly DeVeny IRA Analyst After Hurricanes Harvey, Irma and Maria in 2017, Congress passed special legislation allowing expanded access to retirement plan funds for individuals affected by those storms.  Congress also previously enacted that sort of legislation was for victims of Hurricane Katrina in 2005, victims of severe storms and tornadoes that struck the Midwest in 2008, and victims[...]

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    By Jeremy T. Rodriguez, JD IRA Analyst SIMPLE IRAs are popular retirement vehicles for small businesses. They are relatively cheap to adopt and are easy to understand and administer. However, that doesn’t mean problems do not arise. Routinely, we see issues involving ineligible plan sponsors, missed contributions, and late deposits. If you are thinking about adopting a SIMPLE IRA for your [...]

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    By Beverly DeVeny IRA Analyst IRA owners can clearly combine the accounts they own and they can combine the required minimum distributions (RMDs) from multiple IRAs and take them from any one or combination of their IRAs. But what are the rules for inherited IRAs? An IRA owner cannot combine IRAs they own with IRAs that they have inherited, unless the inherited IRA came from their current [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Legal training is less about memorization and more about understanding how to break down complex problems. With that mind, I often suggest that people understand the law and not try to memorize it. Why was it enacted and what is it trying to prevent, or encourage? Of course, there are exceptions to this general rule. In this arena, I’m talking about [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Question: Hi, I am an advisor and attended the Instant IRA Success workshop in 2017 and found it really useful in my practice. I have a client situation I am trying to clarify and am sure you can help. The client ( husband )passed away on December 27, 2017 at age 82 and was taking RMDs from his IRA. His spouse was the sole IRA beneficiary and is age 75 [...]

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    By Beverly DeVeny IRA Analyst I just had a call from an advisor with a “complicated” scenario. “Ralph” died and left his IRA to his spouse “Alice.” Ralph was 62 in the year he died. Alice did nothing with the IRA. It remained an inherited IRA and there were no required minimum distributions (RMDs) until the year Ralph would have been 70 ½. Alice did not name any beneficiaries.[...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Generally, taking distributions from an IRA or qualified plan before retirement age should be a last resort. Of course, life has its unexpected pitfalls and at times, earlier access to these funds is necessary. One of the ways the Tax Code tries to help taxpayers in difficult financial situations is through exceptions to the 10% early distribution [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Generally, taking distributions from an IRA or qualified plan before retirement age should be a last resort. Of course, life has its unexpected pitfalls and at times, earlier access to these funds is necessary. One of the ways the Tax Code tries to help taxpayers in difficult financial situations is through exceptions to the 10% early distribution penalty.[...]

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    By Sarah Brenner, JD IRA Analyst Question: Hi Ed: I have been reading you for more than 20 years – thank you for all your contributions to our industry. I have a client (about to be over 70 ½) whose new employer told him that he should roll all of his old employer plans and IRAs over to the new employer’s 403b plan (in which he is participating), for the purpose of avoiding [...]

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    By Sarah Brenner, JD IRA Analyst The news has been filled with reports of the flooding and damage in North Carolina in the wake of Hurricane Florence. As the cleanup continues, the IRS has announced tax relief for the storm’s victims. On September 15, the IRS postponed various tax filing and payment deadlines that occurred starting on Sept. 7, 2018. These deadlines will be extended until [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Qualified plans are required to provide participants with a number of notices and information. There’s the Summary Plan Description, the Summary Annual Report, annual safe harbor notices (if applicable), plan account statements (either quarterly or annually), and the Special Tax Notice for distributions. The timing for these notices varies, with some [...]

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    By Sarah Brenner, JD IRA Analyst After last year’s passage of the Tax Cuts and Jobs Act, which overhauled the tax code, you might think Congress would be done with tax legislation for a while. That is not the case. While Republican efforts to unleash as second round of tax reform are likely to hit Democratic resistance and are not widely seen as likely to succeed this year, proposed [...]

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    By Sarah Brenner, JD IRA Analyst Question: Good Morning, I have a question in regards to Roth 401k vs Roth IRA. Can you roll over your Roth 401k to a Roth IRA to avoid the RMD that must be taken when the individual reaches 70 1/2 with a Roth 401k? Thank you. Carol Answer: Hi Carol, You are right that that the required minimum distribution (RMD) requirements are an [...]

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    ROTH IRAS AND THE 5-YEAR RULES

    September 12, 2018

    By Jeremy T. Rodriguez, JD IRA Analyst We constantly see questions regarding the distribution rules for Roth IRAs. Personally, I’ve always thought that the failure to understand these rules prevents many from truly appreciating the benefits of these accounts. Traditional IRAs are easy. Unless we are talking about nondeductible contributions, the money is deductible when contributed and taxable[...]

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    By Sarah Brenner, JD IRA Analyst A recharacterization is a tax-free transfer of funds from one kind of IRA to another. If you converted a traditional IRA to a Roth IRA and now are reconsidering, recharacterization allows you to undo the transaction and move the funds back to a traditional IRA. You can also recharacterize a tax-year traditional IRA contribution from a traditional IRA to a Roth [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Question: Hi Read your column in the Chicago Tribune and have learned a lot.  I have a question I don't think you have addressed. I have multiple Roth IRA's that I converted years ago, paid the taxes and they are continuing to grow.  I am single, have no dependents and have currently listed my estate as the beneficiary.  I have a will that [...]

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    By Jeremy T. Rodriguez, JD IRA Analyst Every so often, the IRS or the courts remind us that the exceptions to the 10% early distribution penalty are narrowly interpreted. That means if your situation doesn’t fit the letter of the law to a “t,” then the exception will not apply, and the tax will be due. Such was the case for Mr. and Mrs. Thompson, a married couple struggling with [...]

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    By Sarah Brenner, JD IRA Analyst You may understand the basics of how an HSA works. The fundamental premise is not so complicated. If you have a qualifying high deductible health plan you may contribute to an HSA. Then, you can take tax-free distributions to pay for qualified medical expenses. Sometimes, those payments come in the form of a reimbursement. Other times you can pay for the [...]

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    By Beverly DeVeny IRA Analyst Question: Hello, I met Ed Slott at an FPA function where he spoke in Independence Ohio, several years ago. I have purchased books written by him, however I am not presently a subscriber to your service. I would appreciate your response to a question. *If a direct rollover is attempted by issuing a check payable to the custodian (In this case TD [...]

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    By Jim Glass, JD IRA Analyst As summer ends and fall approaches, so does the season for taking required minimum distributions (RMDs). There is a 50% penalty for failing to take an RMD, so don't miss one. But don't just take an RMD, plan ahead now to make it work for you. Possibilities... RMD strategies Use withholding to escape a tax underpayment penalty. Tax withheld from an RMD is [...]

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    By Sarah Brenner, JD IRA Analyst You may ask if you should leave your IRA to a trust. This can be a complicated question. Trusts can be complex and retirement accounts are not like other assets. How a Trust Beneficiary Can Get the Stretch If you are thinking a trust is the right beneficiary for your IRA, you will want to be familiar with the requirements for trust a to be a qualified [...]

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