• By Sarah Brenner, JD IRA Analyst Question: Hello Ed, I have received differing views on making a 401(k) conversion to a Roth IRA.  I'm a 64 year old retired federal employee and plan to transfer all my funds from the TSP to my traditional IRA.  From there I plan to make annual conversions to my long established Roth IRA.  Is there an issue with the five-year rule that would prevent me[...]

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    By Ian Berger, JD IRA Analyst Many 401(k) plans must pass two annual nondiscrimination tests: the ADP test and the ACP test. The November 11 Slott Report discusses the ADP test. This Slott Report tackles the ACP test and the options available to 401(k) plans that fail one or both tests. ACP test. While the ADP test takes into account pre-tax deferrals and Roth contributions, the ACP test [...]

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    November 11, 2019

    By Ian Berger, JD IRA Analyst If you participate in a 401(k) plan, you probably know about the annual limit on the amount of your deferrals (for 2019, $19,000, or $25,000 if over age 50). But if you are a high-paid employee, another limit may apply. Welcome to the IRS nondiscrimination rules! These rules are designed to ensure that retirement plans don’t favor “highly [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: Hi Ed, My question: Is there any way to do a charitable distribution from my IRA before I reach RMD age? I am recently retired and 65 years old. Thanks! Marty Answer: Marty - The number-one requirement to be able to do a Qualified Charitable Distribution (QCD) is that the IRA account owner must be 70 ½ years old. We are [...]

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    MODERATION

    November 6, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst Hypersensitivity to caffeine - this is my affliction. So much so that I limit myself to one energy drink per week. It must be opened before noon and should be nursed for a minimum of 90 minutes. Any violation could result in me trying to paint my house with one hand while simultaneously trimming the hedges with the other. In fact, it was on a business [...]

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    By Sarah Brenner, JD IRA Analyst IRAs are for saving for retirement. However, as these accounts have grown over the years, many IRA owners still have significant funds in their IRA at their death. This means that estate planning for IRAs is essential. Effective estate planning for your IRA starts with your beneficiary designation form. Whoever is listed on that form will be considered the [...]

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    By Ian Berger, JD IRA Analyst Question: I am 72 years old and converting my traditional IRA to a Roth IRA a little at a time each year. Do I need to concern myself with a 5-year rule for earnings if I were to withdraw ALL my Roth IRA at once? If I do have to address that issue, is there a way to track earnings for newly converted funds? Regards, Marc Answer: Hi Marc, [...]

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    By Ian Berger, JD IRA Analyst If you’re thinking about leaving your job, you may want to inquire about your company retirement plan’s vesting schedule. If you are close to becoming vested in a retirement benefit, it may pay to stick it out until you have enough service to become vested. Otherwise, you may lose out on a valuable benefit. Being fully vested in your benefit means that you [...]

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    THE 5-YEAR FOREVER CLOCK

    October 28, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst Buckle your seatbelt and hang on to your hat. This ride could get bumpy. We are about to embark on a conversation that might give some readers vertigo or whiplash or all of the above. An article I wrote about the two 5-year clocks for Roth IRA conversions and earnings remains a popular education piece (“Roth IRA: 2 Clocks,” May 13, 2019). However, [...]

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    By Sarah Brenner, JD IRA Analyst Question: I have a question about an IRA split between my husband and me. I got half of his retirement IRA and I was wondering if I am responsible for the taxes if I was to withdraw the funds. Also, if I didn't want all the funds in the account before I opened it, could I tell the custodian to give me a portion and put the rest in? If I could, would I be [...]

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    By Sarah Brenner, JD IRA Analyst Many individuals find themselves stepping away from a job for reasons such as raising children or being a caregiver to aging parents. When this happens retirement savings can take a hit. That does not necessarily need to be case. You may be able to continue to save with an IRA. If you are married you may be able to make a contribution to your IRA based on [...]

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    ALL ABOUT ERISA

    October 21, 2019

    By Ian Berger, JD IRA Analyst Contrary to urban legend, ERISA does not stand for “Every Ridiculous Idea Since Adam.” Instead, it is an acronym for the Employee Retirement Income Security Act of 1974. ERISA is a federal law that regulates employer-sponsored retirement plans and health plans. (ERISA does not cover IRAs because they are not sponsored by an employer.) For retirement plans, [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: Hello, I was wondering, will incorrect information on a Beneficiary Designation form cause it to be invalid?  I see forms with a wrong or missing date of birth, or ones listing more than one beneficiary, each assigned 100%. Thanks, Susan Answer: Susan, An error on a beneficiary form could certainly invalidate it. However,[...]

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    CARRY THE BOX

    October 16, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst My wife teaches elementary school kids. Been at it for years. Long enough to have former students visit her classroom as adults. She was put on this Earth to teach. Tough job, though. Even at this early age, and oftentimes through no fault of their own, students headed down a rugged path to a hard life are already identifiable. Broken families, financial [...]

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    By Sarah Brenner, JD IRA Analyst There are always questions that come up as to the correct way to handle the required minimum distribution (RMD) for the year of death of the IRA owner. Here are three things you need to know about the year of death RMD. 1. The RMD for the year of death will only need to be taken if the IRA owner died after his required beginning date. The required beginning[...]

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    By Ian Berger, JD IRA Analyst Question: I turn 70 ½ this year and my last day of work was September 30, 2019.  Am I required to take an RMD from my work profit sharing 401(k) plan by April of 2020 and, if so, is the RMD calculated on the 12/31/18 account balance?  My employer will roll my profit sharing 401(k) into my IRA on January 2, 2020. Thank you for your help. Answer: [...]

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    RETROACTIVE

    October 7, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst Retroactive adjective ret·​ro·​ac·​tive | extending in scope or effect to a prior time or to conditions that existed or originated in the past; especially: made effective as of a date prior to enactment, promulgation, or imposition. I like that word, and it’s fun to say. Retro-active. Plus, it is powerful. Making something [...]

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    By Sarah Brenner, JD IRA Analyst Question: I attended the two-day event in Washington DC. Is there any news on the attempts in Congress to change the stretch-out? Jim Answer: Hi Jim, It sounds like you are asking about the status of the Setting Every Community Up For Retirement Enhancement Act of 2019 (SECURE Act). This proposed legislation would do away with the stretch [...]

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    By Sarah Brenner, JD IRA Analyst October is upon us. This means fall is in full swing. Along with football, pumpkin-spice everything and stocking up on candy for trick-or-treat come four important October 15 deadlines you will not want to miss! 1. Did you contribute too much to your traditional or Roth IRA for 2018? Maybe you were 70 ½ or over in 2018 and made a contribution to a [...]

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    By Ian Berger, JD IRA Analyst Knowing your limits is important when you’re sitting in a bar and realize that you have to drive home. It’s also important to know the dollar limits that apply when you participate in more than one company retirement savings plan or you change jobs during the year. Deferral limit. There are actually two limits at play. One is a limit on the amount of [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: I am still working at age 71 and don't really need the required minimum distributions (RMDs) from my rollover IRA. The IRA was funded largely with distributions from a tax-qualified pension plan and a tax-qualified 401(k) plan. Some deductible contributions were made many years ago as well. I would like to transfer some of the IRA into my [...]

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    HIGHWAY TO THE DANGER ZONE

    September 25, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst My son is 14. I make every effort to expose him to a wide array of cultural elements. A variety of music. Plays. History. Food. Movies from the 80’s and 90’s are a significant slice of the “Understanding Social References” pie chart. Ferris Bueller’s Day Off, Breakfast Club, Shawshank Redemption, Terminator, Sixteen Candles. Currently queued up [...]

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    By Sarah Brenner, JD IRA Analyst Retirement accounts are supposed to be for saving for retirement. If you tap your retirement savings before reaching age 59 ½, you run the risk of being hit with the 10% early distribution penalty. However, there are exceptions to this penalty. Some apply just to IRAs and some apply just to employer plans. However, the following six exceptions apply to BOTH [...]

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    By Ian Berger, JD IRA Analyst Question: Here is the situation. The mother is deceased and the father is in jail. He has two minor kids that need the money out of his traditional IRA. Could all of the money be taken out and considered a hardship distribution to avoid the 10% penalty on the entire account? Answer: Unfortunately, no. There is no such thing as a “hardship [...]

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    By Ian Berger, JD IRA Analyst Like cassette tapes and slide rules, defined benefit (DB) plans are becoming relics of the past. It’s estimated that 88% of private sector employees with a company plan in 1975 were covered by a DB plan. Today, that number is less than 20%. One reason is the advent of 401(k) plans and other defined contribution plans. Another reason is the decline of the [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst People stumble over themselves all the time. Bad advice is provided, misinformation gets freely disseminated, and sometimes normally smart individuals do less-than-smart things. Stories of good folks fouling up their required minimum distribution are rife. After all, the RMD rules contain a veritable minefield of traps and potential tripping hazards. [...]

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    By Sarah Brenner, JD IRA Analyst Question: Hello, I’ve been a follower of Ed’s expertise for over 10 years. The information has always been helpful and clearly explained. At this time, I’m looking to help a client minimize her taxes. She recently inherited an IRA from her father. She has taken the “Stretch IRA” option and is now receiving her required distributions. Can [...]

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    By Sarah Brenner, JD IRA Analyst Are you questioning that IRA contribution you made for 2018? Maybe you made a Roth IRA contribution and then discovered your income was too high. Maybe you made a traditional IRA contribution but you were ineligible due to your age. You may have made a traditional contribution and just changed your mind. You’d rather contribute to a Roth IRA or maybe not [...]

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    By Ian Berger, JD IRA Analyst If you run a small company, you may be reluctant to offer a retirement plan to your employees because of the cost of plan administration and compliance. If so, you’re not alone: approximately 38 million American workers lack access to a company savings plan. Recently-issued Department of Labor rules may provide some relief.  The rules are designed to make it[...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: Could you please direct me to information that tells me how any conversions I make from my regular IRA to a Roth will be taxed.  My belief was that the amount of any conversion will be taxed at whatever my tax bracket is for the year in which I make the conversion. Is that correct? Therefore, all other things being equal, it is preferable [...]

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    SQUALLS OUT ON THE GULF STREAM

    September 4, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst As I write, Hurricane Dorian is pummeling the Bahamas, churning the ocean and producing catastrophic damage. Godspeed, Freeport. Forecasts suggest the storm will sweep north and brush the east coast of Florida, which is where I live. Hurricanes are nothing to trifle with. I have survived them before and know how to prepare. Should the storm bobble west [...]

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    BACK TO SCHOOL WITH AN ESA

    September 3, 2019

    By Sarah Brenner, JD IRA Analyst The calendar is turning to September and Starbucks is once again selling pumpkin spice lattes. It’s back to school time! We can all agree that education is expensive. If you have children, you know that you cannot afford to miss out on any possible option out there that may help you save. One savings tool that is frequently overlooked is the Coverdell [...]

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    By Ian Berger, JD IRA Analyst Question: Hello, I have an IRA from my deceased father. The beneficiary is my mother, but she passed on before my father. The IRA custodian is saying this doesn't go through the estate but directly to me. I thought all IRA's that don't have a living beneficiary go through the estate. Can you help me understand this? Answer: Sorry about your loss. [...]

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    CATCHING UP

    August 28, 2019

    By Ian Berger, JD IRA Analyst Who says getting old is all bad? Once you reach a certain age, Congress rewards your longevity by letting you contribute an extra amount to your IRA or workplace savings plan – with no strings attached. It’s a great way to boost your nest egg and get an immediate tax break if making pre-tax deferrals (or a tax break down the road if making Roth contributions).[...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Every year thousands of traditional IRA account owners turn 70 ½ years old. In addition, each year thousands of younger non-spouse beneficiaries inherit traditional and Roth IRA accounts. What do these two groups of people have in common? They all must begin taking RMDs. Here’s the kicker – what’s the chance that every single one of these thousands[...]

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    By Sarah Brenner, JD IRA Analyst Question: We found a discussion on your website’s discussion board in 2011 regarding 60-day rollovers straddling two calendar years. We are trying to confirm that a rollover would still be valid even if the Form 1099-R and 5498 may be issued in two different years. Answer: This is a question that comes up frequently. As long as all the rollover [...]

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    By Sarah Brenner, JD IRA Analyst IRAs have now been around for decades. This means these accounts are now being inherited by beneficiaries and even, increasingly, by successor beneficiaries. Here are 3 things you must know if you are a successor beneficiary who inherits an inherited IRA: You can continue the stretch. One of the first questions you may have when you inherit an inherited [...]

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    THE SKINNY ON DC PLANS

    August 19, 2019

    By Ian Berger, JD IRA Analyst You may know that you participate in a DC retirement plan. But what exactly does that mean? (Hint: It doesn’t mean that your plan is sponsored by the District of Columbia.) “DC” actually stands for “defined contribution” plan. Defined contribution plans are a type of company retirement plan and are distinguished from DB (“defined benefit”) plans/[...]

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    THE SKINNY ON DC PLANS

    August 19, 2019

    By Ian Berger, JD IRA Analyst You may know that you participate in a DC retirement plan. But what exactly does that mean? (Hint: It doesn’t mean that your plan is sponsored by the District of Columbia.) “DC” actually stands for “defined contribution” plan. Defined contribution plans are a type of company retirement plan and are distinguished from DB (“defined benefit”) plans/[...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: Hello, I have heard Ed speak at several different Wells Fargo events and he spoke one time about clients who over contribute to their 401(k). I believe there was a strategy where they can move the excess to an IRA. Can you tell me where to find more info on this strategy? Answer: There is no strategy to move an excess 401(k) [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Just as IRA and 401(k) plans have different levels of bankruptcy protection, so too do other possessions. Whether these assets are qualified or not, there are ways to shield oneself from creditors. Case in point - in order to shelter certain monies, a couple in Wisconsin sold their 1974 Plymouth and some real estate. They subsequently purchased a [...]

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    By Sarah Brenner, JD IRA Analyst The Setting Every Community Up For Retirement Enhancement (SECURE) Act recently passed the House of Representatives by a large margin. It is currently stalled in the Senate. This bill includes a multitude of provisions that would reshape retirement savings if passed. Buried deep within the proposed legislation is a provision that would do away with the stretch [...]

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    By Ian Berger, JD IRA Analyst Question: As I understand it, a contribution would be income tax free when sent directly from an IRA to a 501(c)(3) organization.  It is not clear to me if the distributions still will affect my MAGI that in turn will affect Medicare Part B IRMAA premiums. Jennifer Answer: Hi Jennifer, If your IRA distribution satisfies the conditions for a [...]

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    LESSENING THE HARDSHIP

    August 7, 2019

    By Ian Berger, JD IRA Analyst Participating in a company plan, like a 401(k) or 403(b) plan, is a great way to save for retirement. But to make sure that employees don’t use those plans as checking accounts, Congress has imposed limits on when you can withdraw your funds. Generally, you can’t receive a distribution until severance from employment, disability or death. Most plans also allow[...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Many company retirement plans – like a 401(k) – offer company stock as an investment option. Under special tax rules, a plan participant can withdraw the stock and pay regular (ordinary) income tax on it, but only on the original cost and not on the market value, i.e., what the shares are worth on the date of the distribution. The difference (the [...]

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    By Sarah Brenner, JD IRA Analyst Question: Hi Ed, I have heard conflicting reports. Would the proposed SECURE Act affect Roth IRAs? Or, is the elimination of the stretch on for Traditional IRAs? Many thanks! Chad Answer: Hi Chad, There does seem to be a lot of confusion out there on this issue. Yes, the SECURE Act, if passed, would affect inherited Roth IRAs as well as [...]

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    By Sarah Brenner, JD IRA Analyst You may wonder about naming your trust as your IRA beneficiary. For some that may be the way to go, but you should be careful. Trusts are not for everyone. There are trade-offs and consequences. Trusts as IRA beneficiaries create unique problems and tax complications. Naming a Trust Many IRA owners will name a living person as beneficiary of their IRA. [...]

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    GOING SOLO

    July 29, 2019

    By Ian Berger, JD IRA Analyst Sometimes it pays to go solo. For self-employed individuals looking to maximize their nest egg, a solo 401(k) plan -- also known as an “individual 401(k)” or a “uni-k” -- may be a better choice than a SIMPLE or SEP IRA. Who Can Have a Solo 401(k)? Business owners can open up a solo 401(k) as long as they have no employees (other than a spouse). Solo[...]

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    By Andy Ives, CFP®, AIF® IRA Analyst By the look of everyone’s Facebook and Instagram photos, it appears we are all flying Gulfstream jets around the world, relaxing on far-away beaches and lighting Cuban cigars with twisted-up $100-dollar bills. Is the economy really doing that well for everyone? Are we all participating in these boom times? Of course not. Living paycheck to paycheck is [...]

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    A SEP FOR YOUR SIDE GIG

    July 22, 2019

    By Sarah Brenner, JD IRA Analyst It is not unusual for many workers today to have a side gig. They may have job, and it might even be full time, but it’s still not enough to make ends meet. So, they operate their own business on the side. The extra income can be welcome. It can also be an overlooked source for retirement savings. A Simplified Employee Pension (SEP) IRA plan can offer an easy[...]

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    By Ian Berger, JD IRA Analyst Question: I read your November 29, 2017 explanation of rollovers and the time limitations. But my issue is still unclear to me. In December 2018, my husband made a transfer from his 401(k) to an IRA to a Roth IRA. We intended to do the same this year, but an unexpected bill hit us, and we took a distribution from the 401K two weeks ago. Taxes were taken out.[...]

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    By Ian Berger, JD IRA Analyst Many of you who participate in a company retirement plan may have heard that the plan is “qualified” or “tax-qualified.” That sounds reassuring, but what exactly does it mean? In other words, what qualifies a qualified plan to be qualified?  (And, while we’re at it, how much wood can a woodchuck chuck …?) The carrot and the stick: The concept of a[...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Roth IRAs and Roth 401(k) plans are incredibly popular, and why wouldn’t they be? Both offer tax-free earnings and allow the account owner to pass tax-free dollars to their beneficiaries. However, despite the ubiquity of Roth accounts, there are some common misunderstandings about how Roth IRAs and Roth 401(k)s operate and interact with each other. [...]

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    By Sarah Brenner, JD IRA Analyst Question: I have read your updates and shared information regarding the SECURE bill that is in the Senate currently.  The information discusses the non-spouse beneficiaries of IRAs will need to take distributions over 10 years as a lifetime stretch will not be an option anymore. Do you have any information on existing Inherited IRAs that are already in [...]

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    GOING IN REVERSE

    July 10, 2019

    By Ian Berger, JD IRA Analyst When driving your car, most of the time you’re going forward. But sometimes, like when you back into a parking spot in anticipation of beating the traffic after a sporting event or concert, you must shift gears to reverse. So it is with rollovers between 401(k) plans (or other employer plans) and IRA’s. Most of the time you’ll be considering a rollover [...]

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    By Ian Berger, JD IRA Analyst ‘Tis the season for bee stings and mosquito bites. Just like those summer irritations, 401(k) plan loans have their own annoying rules that can make them risky transactions. Fortunately, a provision of the 2017 tax reform law applied a little hydrocortisone to help relieve the itch. One advantage that 401(k) plans have over IRA’s is that 401(k)’s (as [...]

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    By Sarah Brenner, JD IRA Analyst Happy 4th of July to all the loyal readers of the Slott Report! This summer holiday is a time for barbecues. This is a time when all ages come together to celebrate. Families will gather to grill hot dogs, roast marshmallows and watch fireworks. If the conversation around the grill should happen to turn to retirement savings, here are 4 IRA tips, one for each [...]

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    By Sarah Brenner, JD IRA Analyst Did you inherit an IRA from someone who is NOT your spouse? This is not uncommon. Maybe you inherited from a sibling or a parent or a friend. If this is your situation, you will want to proceed with caution. For nonspouse beneficiaries a wrong move can result in disastrous consequences. So, take your time and do it right. Step one is to carefully explore [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: Your advice, articles, publications and books I’ve purchased over the years have been great and most informative. Great job! My question is with regards to NUA – I retired recently (age 66) and had a company 401(k) to which I contributed over the years and will likely not make any withdrawals until required RMD’s. Within the company [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Prior to 2002, a default option for paying out required minimum distributions from an inherited IRA to a beneficiary was the 5-year rule. If the IRA owner died before their required beginning date and an election was not made in a timely manner, the account had to be closed by December 31 of the 5th year following the year of death. In 2002, new [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Roth IRAs are a wonderful way to save for retirement. A person can sock away $6,000 a year (plus another $1,000 if they are age 50 or older) and the earnings will grow tax free. Plus, most custodians allow Roth IRA dollars to be invested in an incredibly wide array of options – mutual funds, stocks, ETFs - a veritable smorgasbords of choices. Can’t [...]

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    By Sarah Brenner, JD IRA Analyst Question: I set up a Roth outside my employee retirement plan. I retired on 10-01-2018. I set up an automatic contribution to my Roth IRA from my checking account and, up to this day, still continue to contribute to the Roth IRA . Shall I opt out since I’m retired now? Your advice is deeply appreciated. Thank you very much. Sincerely, Ester [...]

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    By Sarah Brenner, JD IRA Analyst The road to retirement is long. Along the way you may need or want to move your retirement funds. Maybe you are leaving a job or maybe you are just looking for a new investment strategy. When the time comes to make a move, you will want to be sure that everything is done correctly. Rolling over retirement funds can be tricky and the consequences of a mistake [...]

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    By Sarah Brenner, JD IRA Analyst Every single month since January of 2014, Billy Joel has headlined a sold-out show at Madison Square Garden. Demand for tickets to see the Piano Man has not waned. Ticket sell out quickly. Millions of fans will attest that Billy Joel, who’s music career spans decades, still puts on an incredible show. It’s hard to believe that Billy Joel just recently [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: I am over 70.5 and I have to take an IRA minimum distribution or else pay taxes and penalties on scheduled amount. My question is - can I take the mandatory distribution which I will pay taxes on anyway and then roll the distribution into my ROTH IRA? So far I have several YES and several NO answers. Your input would be the deciding vote for [...]

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    THE TIME MACHINE

    June 12, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst A time machine would be cool to have. Even if it only worked on financial assets, it sure would come in handy. One might jump into the future and see if an investment paid off, or you could look around to see where the smart money succeeded. And if the original investment turned out to be a loser, you could go back in time and sell it – or never even [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst The pro-rata rule is the formula used to determine how much of a distribution is taxable when an IRA account consists of both pre-tax and after-tax (basis) dollars. The rule requires that all SEP, SIMPLE, and traditional IRAs be considered as one giant “Starbucks Venti mug of money” for every distribution or Roth conversion. When both pre- and [...]

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    By Sarah Brenner, JD IRA Analyst Question: I am a financial advisor and want to be clear on something. If a client has a SIMPLE IRA that they are contributing to and have an IRA and are 70.5, can they aggregate the distributions for both and remove from the IRA? Wanda Answer: Aggregation of RMDs is a tricky area and we see lots of mistakes. SIMPLE IRAs can be confusing as well [...]

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    By Sarah Brenner, JD IRA Analyst When it comes time to calculate your required minimum distribution (RMD) from your IRA, you may wonder which life expectancy table to use. Last updated by the IRS back in 2002, there are three possible tables for IRA owners and beneficiaries, and they can all be found in IRS Publication 590-B. The three tables are the Uniform Lifetime Table, the Joint Life [...]

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    By Sarah Brenner, JD IRA Analyst SIMPLE IRAs are not so simple. One factor that makes SIMPLE IRAs tricky is that they are subject to unique rules, found nowhere else in the tax code, such as the two-year holding period. Two-Year Holding Period When does the two-year holding period begin? This is a question that often creates confusion. The two-year holding period begins with the date [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: IRA HELP, I’ve got a client who is retiring early. He has roughly $1,000,000 in an IRA now which he could initiate a 72(t) with.  That will not generate enough cash flow to support their needs. He also has an additional $3 million in his employer’s ESOP which, under the terms of the ESOP, will not be available for an IRA rollover [...]

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    By Sarah Brenner, JD IRA Analyst The IRS has announced the 2020 inflation-adjusted limits for Health Savings Accounts (HSAs). How an HSA Works An HSA is a tax-free account that is used to pay for qualified medical expenses that aren’t covered by insurance. It is similar to an IRA in that it’s a custodial or trust account set up with a financial institution owned and controlled by [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Employer-sponsored retirement plans, like 401(k) and 403(b) plans, have some definitive benefits vs. IRA accounts. For example, company plans provide an unlimited amount of protection from bankruptcy, while IRA contributions and earnings maintain a current bankruptcy protection cap of $1,362,800. In addition, employer-sponsor plans can allow loans – [...]

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    By Sarah Brenner, JD IRA Analyst Question: I have a question about avoiding RMDs for a still-working 73 year-old in a 401k plan.  I realize most people my age are looking forward to retirement, but I love what I do and am delighted to continue to be able to work. I am about to change employers and would like to request a “direct rollover” from my old employer (who I still work for [...]

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    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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    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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