• ROLLING OVER AN RMD

    April 6, 2020

    By Andy Ives, CFP®, AIF® IRA Analyst Like most people’s lives, the retirement world is upside down. This is made evident by a single statement: “Required minimum distributions (RMDs) can be rolled over.” Yes, that is the new normal – at least for this year. RMDs are considered the first money out of an IRA and workplace plan. Typically, these dollars are ineligible to be rolled [...]

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    By Ian Berger, JD IRA Analyst Question: The virus pandemic has prompted legislation that has eliminated the requirement for me to take a required minimum distribution (RMD) from my IRA for the year 2020. Am I therefore allowed to do a partial Roth IRA conversion in 2020 without having to take 2020 RMD first? Answer: Yes. The CARES Act RMD waiver for 2020 means you are not required [...]

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    By Ian Berger, JD IRA Analyst The recently-enacted “Coronavirus Aid, Relief, and Economic Security Act,” or CARES Act, includes special tax relief for IRA and company plan withdrawals made in 2020 and for company plan loans. Who gets relief? Both the distribution and plan loan relief apply only to “qualified individuals.” Not everyone meets this definition. The definition includes:[...]

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    By Sarah Brenner, JD IRA Analyst As the coronavirus pandemic has spread, many Americans have been hit hard. Their retirement accounts have also taken a serious blow as markets have plummeted. In these tough times, there is a bit of good news as the government has come through with some relief for retirement savers. IRA Deadline Extended until July 15 The IRS has extended the tax-filing[...]

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    By Sarah Brenner, JD IRA Analyst Question: With the COVID-19 changes to push the tax filing back to July 31st, can someone still make a 2019 contribution until that date or do all contributions need to be made by the usual April 15th deadline this year? Jerry Answer: Hi Jerry, This is a question we have been getting a lot! The IRS has confirmed that the deadline for making [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst By their nature, small businesses struggle in the shallows. Now they face a tsunami. However, when the shutters are removed and customers return and the employees are back on the payroll, normal day-to-day concerns will be a welcome relief. My guess is that many small business owners will create improvements, look to reward dedicated employees, and try to[...]

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    By Ian Berger, JD IRA Analyst It’s common for IRA owners to leave their assets to multiple beneficiaries – for example, their children. Before the SECURE Act, it usually made sense to split the IRA into separate accounts either before or after death. That’s because beneficiaries could stretch payment of their shares over their life expectancy. But, if there were multiple beneficiaries [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: A daughter who has been diagnosed with rheumatoid arthritis is listed as the beneficiary on her father’s Roth IRA.  Does this disease qualify as a “chronic illness” for purposes of the exception to the 10-year rule? Is there a definition that the IRS uses for chronic illness? If she doesn’t take the inherited IRA after 10 years but [...]

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    By Sarah Brenner, JD IRA Analyst The coronavirus has been wreaking havoc on markets and millions of retirement account balances have suffered significant losses. This has left many IRA owners looking at lower account balances after several years of gains and wondering what the next step should be. One strategy to consider in a market downturn is a Roth IRA conversion. Why Convert Now? [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst When a person takes a distribution from his IRA or workplace plan, he has 60 days from the day of receipt to redeposit (i.e., roll over) those dollars into another qualified account. This assumes no other disqualifying rollovers have been done in the past 12 months and these dollars are otherwise eligible to be rolled over. If he fails to redeposit all or[...]

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    By Ian Berger, JD IRA Analyst Question: Hi Ed, First of all, I'm a big fan.  Now here's my question: If I do a backdoor Roth conversion with exclusively nondeductible IRA contributions, is there a 5-year clock on withdrawing the converted dollars without penalty?  In this case there are no other outstanding IRA dollars. I know there’s a 5-year clock on conversions of deductible [...]

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    By Ian Berger, JD IRA Analyst The amount of annual elective deferrals you can make to a 401(k) or 403(b) plan is limited by the tax code. If you discover that you’ve over-contributed in 2019, time is of the essence to correct the error. If you don’t act quickly, the tax consequences are serious. What is the limit?  For 2019, you were limited to $19,000 in elective deferrals (plus an [...]

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    By Sarah Brenner, JD IRA Analyst The SECURE Act eliminated the age restriction on contributions to traditional IRAs. The rule outlawing contributions for those 70 ½ or older is no more. This is good news for older IRA owners who are still working or have a spouse who is. Now, traditional IRAs have joined Roth IRAs as available options for eligible savers of all ages. This new rule may seem [...]

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    By Sarah Brenner, JD IRA Analyst Question: My dad was 86 when he died and I inherited half of his IRA, which I elected to stretch.  Am I correct in thinking that since I am not yet 70 ½, I am not allowed to direct qualified charitable distributions (QCDs) from this IRA?  Please advise. Thanks, Ron. Answer: Hi Ron, You are correct. Beneficiaries can do QCDs, but to be [...]

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    RMD TRIVIA

    March 4, 2020

    By Andy Ives, CFP®, AIF® IRA Analyst True or False?  “It is mathematically impossible for an IRA account owner to have his first required minimum distribution (RMD) be due for the year 2020.” Here’s why this statement is true. First, we are not talking about inherited IRAs. If the account owner died in 2019, then the first RMD for the beneficiary needs to be taken by December [...]

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    By Ian Berger, JD IRA Analyst Who can offer them? Most company retirement savings plans, such as 401(k), 403(b) and 457(b) plans, are allowed to (but not required to) offer plan loans. Loans are not allowed from IRAs or SEP and SIMPLE-IRA plans. What is the maximum amount I can borrow? Plan loans are generally limited to the lesser of 50% of your vested account balance, or $50,000. Your [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: Looking for your help. Husband has an inherited IRA (from his dad prior to the SECURE Act) and was taking RMDs using the single life table. Husband passes away in 2020 and leaves the inherited IRA to his wife who is age 65. What are the wife’s options for distribution? Thanks, Travis Answer: Travis, Under the SECURE Act, if[...]

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    By Sarah Brenner, JD IRA Analyst The SECURE Act overhauled the rules for beneficiaries of retirement accounts. One significant change it brought is the new 10-year payout rule. Here are ten things you need to know about the new 10-year rule. 1. The 10-year rule applies to most nonspouse beneficiaries when the account owner dies in 2020 or later. The bottom line with the SECURE Act is that [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst A spouse beneficiary of an IRA faces many decisions. There is great flexibility and many items to consider. For example, how old was my spouse when he or she passed and what impact will that have on my available choices? Do I need money now? How can I minimize my tax burden? Will penalties apply if I withdraw from the account? By systematically [...]

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    By Ian Berger, JD IRA Analyst Most workplace retirement plans allowing elective deferrals fall into one of these varieties: 401(k) plans for employees of private sector companies. 403(b) plans for employees of tax-exempt employers, public schools and churches. 457(b) plans for employees of state and local governments. Although many of the tax rules governing these types of plans [...]

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    By Ian Berger, JD IRA Analyst Question: For the last three years, I have done a back door Roth conversion. I do the conversion in January. I am 68 years old and I am rolling over my 457(b) New York City deferred compensation plan funds to a rollover IRA with Vanguard. They will get the money around April 1, 2020. Will there be a tax penalty for the 2020 Roth conversion? Answer: [...]

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    By Sarah Brenner, JD IRA Analyst Many IRA owners have named trusts as their IRA beneficiaries. You may be one. Trusts offer control from the grave and can be a smart choice, especially to protect beneficiaries who may be minors, have special needs or simply are not good with money. Naming a trust as an IRA beneficiary has always had its problems. The rules are complicated and having a trust [...]

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    By Sarah Brenner, JD IRA Analyst Question: Can a QCD be used to pay dues to a charitable organization? Answer: This is an area where we receive a lot of questions. To qualify as a QCD, there cannot be any benefit back to you from the funds that go from your IRA to the charity. Paying dues required for membership would be a benefit back to you and as such would not qualify as a QCD.[...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Do you want to access your IRA funds penalty-free, even though you are under age 59 ½ and no exception fits your situation? It can be done. Starting a new business and need capital from your IRA, but don’t want to pay the 10% early withdrawal penalty? There is a workaround. Lost your job and require funds to cover your mortgage and cell phone bill, but[...]

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    Ian Berger IRA Analyst One important difference between IRAs and company retirement plans is spousal protection. Except for community property states, spouses of IRA owners do not have any rights to the account. By contrast, many workplace plans must provide spouses at least some financial protection. In the world of company plans, spouses have potentially two types of protection, depending[...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: An initial ROTH conversion was completed in 2018 for tax year 2018. A second conversion was completed in 2019 for tax year 2019. There was no ROTH IRA account prior to 2018 and the account owner is over 59 ½. The 5-year holding period will be satisfied on 1/1/2023. Does each ROTH conversion transaction have a separate 5-year clock to [...]

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    By Sarah Brenner, JD IRA Analyst Are you looking for a better investment for your IRA? Are you thinking about making the move to another IRA custodian or financial advisor? You do have this opportunity. The IRA rules are set up to allow portability. However, if you are taking required minimum distributions (RMDs) from your IRA, you can still move your money, but things are a little more [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst For those who inherit IRA accounts in 2020 or later, the SECURE Act permits five groups of people to stretch required minimum distribution (RMD) payments over their life expectancy. As I touched on in a recent Slott Report article (“The Stretch on a Stretcher,” Jan. 13), these five groups fall under the new term “Eligible Designated [...]

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    By Ian Berger, JD IRA Analyst Question: Hi Ed, Question on the new SECURE Act: Do you know if there were any changes to the payout period if an estate is the beneficiary of an IRA. Is it still a 5-year payout? Or is it now 10? Thanks, appreciate your help. Janet Answer: Dear Janet, The SECURE Act made lots of changes to the IRA rules. But one change it did not make is to[...]

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    By Ian Berger, JD IRA Analyst Part-time employees in companies with 401(k) plans won a big victory when the SECURE Act was signed into law on December 20, 2019. Before the SECURE Act, 401(k) plans could exclude employees if they did not work at least 1,000 hours of service in a 12-month period or were under age 21. These rules have prevented many long-term part-time employees from the [...]

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    By Sarah Brenner, JD IRA Analyst Question: According to the IRS website: Beginning in 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own (Announcement  2014-15 and Announcement 2014-32). The limit will apply by aggregating all of an individual’s IRAs. Trustee-to-trustee transfers between IRAs [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst As we gradually peel back the layers of this legislative onion called the SECURE Act, more and more discoveries come to light. One revelation is how qualified charitable distributions (QCDs) are potentially affected. Could a QCD become, effectively, a taxable distribution? A looming cloud could soon peer over the shoulders of otherwise generous and giving[...]

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    By Ian Berger, JD IRA Analyst The new SECURE Act contains three provisions that are designed to promote annuities in company savings plans. The January 8, 2020 Slott Report described the first of these three changes – new protection for companies if the insurance company selected by the plan to provide annuities later runs into financial difficulties and cannot make payments. Today, we will [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: Hoping you might be able to offer some guidance. We have a client who has two IRA accounts.  The client is 80 years of age. He wants to convert the full amount in one of his IRA accounts to a Roth. The IRS says that distributions from IRA accounts are treated as satisfying the RMD first, so we need to take the RMD before we process the [...]

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    By Sarah Brenner, JD IRA Analyst On December 20, 2019 the Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law. This new law includes some big changes for your retirement account. Here are the top 10 things you need to know: No more age limits for traditional IRA contributions. Beginning in 2020, the new law eliminates the age limit for traditional IRA [...]

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    THE STRETCH ON A STRETCHER

    January 13, 2020

    By Andy Ives, CFP®, AIF® IRA Analyst The stretch IRA is on a stretcher and paramedics just loaded it into an ambulance. It is on life support. Prognosis: negative. For most new beneficiaries, the stretch will not survive. The SECURE Act is the perpetrator, and it gives no quarter. The Act stood defiantly over the stretch after inflicting its damage and made no effort to run when the sirens [...]

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    By Ian Berger, JD IRA Analyst Question: I turn 70 1/2 in 2020. Since I do not have to take a required minimum distribution (RMD), how much can I do in a qualified charitable distribution (QCD) this year? Ronnie Answer: Hi Ronnie, Even though you won’t have an RMD for 2020, that doesn’t affect your ability to take a QCD at age 70 ½. One of the benefits of taking a QCD is [...]

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    By Ian Berger, JD IRA Analyst There are three new provisions in the recently enacted SECURE Act designed to promote annuities in company savings plans. That explains why insurance companies lobbied so hard for passage of the legislation. The three provisions are: New protection for plan sponsors who want to start offering annuities. New options for participants to keep their plan [...]

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    Sarah Brenner, JD IRA Analyst The SECURE Act is here! Most of new law’s provisions kicked in on January 1, 2020, overhauling many of the rules for retirement accounts that have been with us for decades. One significant change the SECURE Act brings us is the delay in the age at which RMDs must start from 70 ½ to 72. This new rule has raised questions as to how those who reached age 70 ½ [...]

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    Sarah Brenner IRA Analyst Question: With the SECURE Act, can a person who is older than 70 ½ fund a 2019 Traditional IRA?  The SECURE Act goes live on 1/1/2020, and an IRA can be funded up to 4/15/2020 for the previous year.  Any reason they cannot? Answer: Unfortunately, the answer is no. The new rule eliminating the age limit for traditional IRA contributions is effective [...]

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    HAPPY NEW YEAR

    December 30, 2019

    Ian Berger, JD IRA Analyst The clock is winding down to the ball-dropping in Times Square that will usher in a new year – and a new decade. The Ed Slott and Company team wishes to thank you for supporting The Slott Report and responding to our articles with such insightful comments and questions. 2020 promises to be an exciting year in the IRA and savings plan worlds, as the full [...]

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    By Andy Ives, CFP®, AIF® IRA Analyst Question: Hi Ed, Hope all is well.  I have a client that received the HEART benefit as her spouse passed away a few years ago.  We immediately moved those dollars into a Roth for her.  My question is, as we are doing some year-end planning, can I add to this Roth by doing a conversion, or do I need to open up a separate Roth for her? Answer:[...]

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    By Andy Ives, CFP®, AIF® IRA Analyst As of the writing of this Slott Report submission, it is Monday, December 23, 2019. T-minus 8 days before the end of the year, which means IRA owners have a tight window to complete any year-end transactions. Once the calendar turns, if not finalized in time, some items will be forever lost. Here are six transactions that absolutely must be completed [...]

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    By Ian Berger, JD IRA Analyst Question: My husband has taken two different qualified distributions from his Roth IRA within the last 60 days.  We would like to "pay those back.” It looks like we can put money back into the Roth IRA as a rollover. My question is:  Can we put the total amount of the two distributions back into the same IRA, or are we limited to "paying back" just one [...]

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    By Sarah Brenner, JD IRA Analyst With the clock ticking down on 2019, Congress is expected to enact a $1.4 trillion year-end spending bill to keep the government running. Tucked away inside this mammoth piece of legislation is the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The SECURE Act is set to become effective January 1, 2020. This new law includes significant [...]

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    FIVE QDRO Q&AS

    December 16, 2019

    By Ian Berger, JD IRA Analyst 1. What is a QDRO? A QDRO is a “qualified domestic relations order.” In plain English, it is a state court order obtained by divorcing parties that requires an ERISA plan to pay a portion of a participant’s benefit to the non-participant spouse. QDROs are an exception to the rule that prohibits an ERISA plan from paying benefits to anyone other than a [...]

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    By Sarah Brenner, JD IRA Analyst Question: As year-end approaches, I have just exceeded my 2019 RMD, combining total QCD's during the year and my regular monthly IRA withdrawals. If I make additional charitable contributions from my IRA this month, are they still considered tax-advantaged QCD's, or has my QCD opportunity ended because I've already exceeded the annual RMD? Answer:[...]

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    GUNFIGHT AT THE 401(K) CORRAL

    December 11, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst When the chips are down, the providers hold all the cards. This is true for both IRAs and workplace plans. Ultimately, the IRA custodian (through its custodial form) and retirement plan sponsor (through the plan document) will dictate what a person can and cannot do with his retirement dollars. Prior to sauntering into a local saloon and sitting down at [...]

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    Weekly Market Commentary

    December 10, 2019

    December 10th, 2019 Chadd Mason, CEO The Cabana Group Yet Again, the Market Focuses on What Matters - Interest Rates and Earnings After a rocky start to last week, U.S. equity markets rebounded and finished higher, led by Friday's 1% bounce in the S&P 500. The employment number reported on Friday was exceptionally strong and is further evidence that economic growth can continue. This[...]

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    By Ian Berger, JD IRA Analyst Just like eating too much pumpkin pie with whipped cream isn’t good for your waistline, being a “top-heavy” retirement plan also may not be healthy. Sponsors of certain retirement savings plans must have their plan tested each year to determine if it is “top-heavy.” The top-heavy test is designed to make sure that lower-paid employees receive at least[...]

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    THANKSGIVING PARADE

    December 4, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst The Macy’s Thanksgiving Day Parade is a river of sights and colors and sound. A snappy marching band flows to an army of volunteers clutching the ropes of a six-story inflatable SpongeBob, swaying in the wind. Flag bearers and cheerleaders give way to a giant turkey in a Pilgrim hat being towed by a pick-up truck. Singers and dancers stream past and [...]

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    ACTIVE PARTICIPATION

    December 2, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst Jenny earns a salary of $1,000,000. She is single and is not an active participant in a company retirement plan. Jenny can contribute $6,000 to a traditional IRA and deduct the full amount on her taxes. Benny, also unmarried, has a modified adjusted gross income of $76,000. He participates in a 401(k) at work. Benny can make a $6,000 contribution to a [...]

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    By Sarah Brenner, JD IRA Analyst Roth IRAs first arrived over twenty years ago. A lot has changed since 1998. That was the year that Google was founded and an electronic pet called a Furby was one of the most popular Christmas gifts. However, some things haven’t changed so much. Impeachment is once again all over the news and here at the Slott Report we are still being asked many questions [...]

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    By Ian Berger, JD IRA Analyst Question: I am over 71 and have 2 IRAs, one in my name, the other is inherited. Can I take one RMD from the inherited IRA to satisfy both? Or must I treat them separately and do 2 separate RMDs? Thank you! Tyler Answer: Hi Tyler, You must treat the IRAs separately and take two separate RMDs. If you own more than one IRA (not [...]

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    By Sarah Brenner, JD IRA Analyst If you are charitably inclined and have an IRA, you might want to consider doing a Qualified Charitable Distribution (QCD) for 2019. The deadline for a 2019 QCD is fast approaching. It is December 31, 2019 and many custodians have even earlier cutoffs. Don’t miss out on this valuable tax break. Here are ten QCD rules you need to know. 1. Must be Age 70 [...]

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    QCDS AT THE STATE LEVEL

    November 18, 2019

    By Andy Ives, CFP®, AIF® IRA Analyst Earlier this month, a tax notification service released information declaring that “North Carolina Governor Roy Cooper signed legislation allowing an income exclusion for distributions from individual retirement accounts (IRAs) to charities by taxpayers age 70½ or older. Beginning with the 2019 tax year, North Carolina conforms to the federal income [...]

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    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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