• IRA BLOG

  • Question: I was curious if a Roth conversion of post-tax money from an IRA is subject to the pro rata rules if the IRA owner also owns a SIMPLE IRA?  Is the SIMPLE excluded from the calculation? Thanks Joseph Answer: Joseph: The pro-rata rule looks at the balance...

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    One of the greatest benefits of an IRA is its ability to provide tax-favored wealth for heirs. An IRA left to a beneficiary can be "stretched" to provide pre-tax compound investment returns for the rest of the beneficiary's life -- or even longer.  And these can be distributed ...

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    Question: Dear Mr. Slott, I am writing because I have what may be an unusual IRA reporting situation and would like advice, or if you will, a judgement as to how I may handle the reporting for 2017.  This particular situation is one I have not heard of or seen discussed in ...

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    One of the benefits of a Roth IRA is that contributions can always be distributed out of the Roth IRA with no tax, and no early distribution penalty for those that are under age 59½. But, you have to be able to prove to IRS that you are taking a distribution of contributions ...

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    With the 2017 tax filing date quickly approaching, many taxpayers are looking to take advantage of IRA contributions to lower taxable income prior to filing. However, before making that contribution, you want to be sure that you meet all the eligibility rules. The 2017 income ...

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    Question: Thank you for your very interesting monthly articles.  I have the following Roth-related earned income question: Have any clever retirees and/or tax advisors figured out exactly how to justify claiming that either “conventional” pension payments or RMD ...

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    A QCD is a qualified charitable distribution. It is a way to transfer funds from your IRA to a qualifying charity as a non-taxable distribution. It can also satisfy your RMD (required minimum distribution) for the year. You must be at least age 70½ at the time of the transaction...

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    For many Americans, their IRA is their largest asset. It is not surprising then that in times of financial trouble they may want to turn to their IRA as quick source of cash. If this is your situation and you are thinking about using your IRA for a short-term loan, here is what ...

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    Question: Dear Mr. Slott, I have been receiving your e-mails for a number of years and have read your comments in The Wall Street Journallong before that - and have always found them of value. I have two questions I am hoping you can help me with that I believe have ...

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    Tax return information is confidential. As the April 17th tax filing date approaches, pay attention to keeping your tax return information out of the hands of those who could cause you harm. Protecting Information on Your Tax Return Your tax return is full of private ...

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    One of the many issues facing self-employed individuals is how to save for retirement. Of course, one option is to open a traditional or Roth IRA. However, the annual maximum contribution is low in terms of retirement planning. In 2018, it $5,500 if you are under age 50 ...

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    Question: Dear Sir, Greetings and wish you well. I heard about your helpfulness and appreciate if you can kindly advise me the following: We (mother and daughter) have an S corp and set up solo 401(k)s.  I made an error in profit contribution.  Unfortunately, I ...

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    Spousal IRAs are designed to allow a working spouse to make IRA contributions for a spouse who does not have enough earned income to make their own IRA contributions. There are some key requirements that must be met: The spouses must be legally married and file a ...

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    If you have an IRA, you need to know about the “sweet spot.” What is the IRA sweet spot? Well, that is when you are between ages 59½ and 70½. Your Sweet Spot What makes this spot sweet? This is the time when you have the most flexibility with your IRA. When you reach...

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    Question: Dear Mr. Slott, I found your excellent article in Financial Planning concerning excess IRA contributions discovered after the filing deadline. I was hoping you could clarify one point: Your article states that the IRS does not require the withdrawal of the net ...

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    The IRS website provides a host of free resources that can help minimize your tax bill and manage your taxes all year round. Yet, most taxpayers are unaware of them. Here are a dozen of the best. Reach them by clicking on the links below (every heading or blue-colored word is ...

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    The pro-rata rule is an important, though commonly misunderstood, rule that affects the taxation of IRA money. It only comes into play when your traditional IRA consists of both pre-tax and after-tax monies. These after-tax dollars can come from non-deductible IRA contributions ...

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    Question: Husband died in 2015 at age 85.  Later that year, the surviving spouse (sole beneficiary) did trustee-to-trustee transfer to her Roth IRA.  She did not have a Roth IRA prior to that. Wife, age 90, took distributions in 2016 and 2017.  Are those qualified?  Are...

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    NOTE: This article is not based on a complete review of all the inflation adjusted numbers. The Tax Cuts and Jobs Act revised the way inflation adjusted numbers will be calculated by IRS. The Act now mandates that these numbers be calculated using chained CPI. IRS has gone ...

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    Do you think you understand all the rules that govern your Roth IRA? Not so fast! There are many misconceptions as to how these complicated accounts work. Here are 5 Roth IRA facts that might surprise you: 1. You are never too old to contribute. If you have earned income ...

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    Question: The business is a sole proprietor operation with no employees other than the owner.  The owner is 71 and is still working.  Are contributions into this SEP allowable after the age of 70 1/2? Thank you, Lee Answer: Yes, the business owner can continue ...

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    Bitcoin is receiving a surge of publicity as a possible IRA investment, and a number of new firms have recently started targeting the "Bitcoin IRA" market. Here are six things to know about investing IRA funds in bitcoin:   1)  There is no such thing as a "Bitcoin IRA." ...

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    Roth IRAs have been around for 20 years now. Lots of taxpayers have taken advantage of the tax-free benefits of these accounts by converting their traditional IRAs or employer plans to Roth IRAs. But many have hesitated. Maybe you are among those who held back. The year 2018 may ...

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    Question: I have a client who has some after-tax contributions in an IRA, along with pre-tax contributions.  They also have another IRA and 401(k)s.  My question is: Can we convert just the after-tax contributions to a Roth IRA or is it pro-rated as a % of the overall ...

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    What is the simplest mistake you can make to cause major harm to your intended estate plan - and to the people you wish to provide for through that plan?   It is having outdated (or missing entirely) beneficiary designation forms for your IRAs, employer-provided retirement ...

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    On Friday February 9, 2018, President Trump signed into law the Bipartisan Budget Act of 2018 (the “Act”). While the Act is best known for ending the nine-hour government shut down that took place on February 9, 2018, it also contained some tax-related provisions. One of ...

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    You may be interested in contributing to a Roth IRA but think your income is too high. You are probably aware that there are income limits that apply to Roth IRA contributions. For 2018, if you are married, your ability to make Roth IRA contributions phases out when your Modified...

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    Question: Hello, I was forced, due to health reasons, to retire at age 58 on December 8. I had been with my company for 34 years. I need to cash in my IRA fund for money to pay bills and insurance. What is the best way to avoid having to pay the IRS the 10% penalty ...

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    The U.S. Tax Code is a 74,000-page document with interrelating laws and regulations. Therefore, any time Congress enacts a piece of legislation as massive as the Tax Cuts and Jobs Act (TCJA), there are going to be unintended consequences, or as I like to call it, collateral ...

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    As you prepare your 2017 tax return, use the information you collect both to make the best IRA contribution choices for 2017 and plan IRA strategies for 2018. Six ways to consider: 1. Maximize IRA Contributions for 2017  2017 IRA contributions can be made until April 17, ...

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    Question: IRA Expert, I have a client that has $3M in a profit sharing plan (PSP). He is rolling over $1.5M of it to an IRA with me. He plans to take his RMD ($54,744) on that $1.5M after he turns 70½  on 4/3/2018 and give it directly to charities. He wants to wait ...

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    It has been widely reported that the Tax Cuts and Jobs Act eliminated the ability to recharacterize Roth IRA conversions as of January 1, 2018. On the other hand, it kept the ability to recharacterize IRA and Roth IRA contributions. Despite all the above, an unanswered question ...

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    The Tax Cuts and Jobs Act made sweeping changes to the tax laws. Brackets have been changed, deductions have been eliminated, and retirement plans have been affected. You may be wondering what the new law means for your IRA. Here are 5 things you need to know: 1. ...

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    Question: I would like to ask a personal question about withdrawing funds from my traditional IRA account. How can I use part of it for a down payment when buying a new home as a first-time home buyer, without paying much in taxes on the withdrawn amount? I appreciate ...

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    529 Educational Plans Should Be Gaining in Popularity  Now that the dust has settled and the tax code has been “reformed,” it’s time to unpack those changes and analyze how best they can help you and your clients. One of the changes was the expansion of 529 educational ...

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    The IRS says it will start accepting and processing 2017 tax returns on January 29 and expects to issue nine of 10 refunds within 21 days. To get the fastest refund possible, file electronically and request direct deposit of the refund amount. The IRS says it won't start ...

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    Question: Single - W-2 worker making $ 500 a week.  Few if any deductions. Contributes to employer 401K 3% of salary for a Traditional IRA. Is it legal to open up a separate Roth account say in Scottrade with $ 5500? Thank you for your help! -Mike Answer: Hi ...

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    In many households, married couples divvy up the responsibilities; one will handle the bills and banking while the other cooks and does the grocery shopping, or one will do the laundry while the other manages the yardwork and house. This split often extends to annual income tax ...

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    The year 1998 seems like a long time ago. In January 1998, Bill Clinton was in the White House and about to be impeached. The Unabomber was in the news and the Spice Girls were winning music awards. January 1, 1998 also brought us the launch of Roth IRA. However, unlike other ...

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    Question: Greetings, No one seems to know the answer to this. Figured I would try you. Client has a 600k IRA. Doing a SEPP of 24k/yr. Has to give 400k to her ex-husband from her IRA. How to adjust SEPP? She is 57 and he is 65. Do we pro-rate the SEPP so she takes 8k/yr ...

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    One of the greatest benefits offered under ERISA are the anti-alienation provisions, which provide that benefits under a pension plan cannot be assigned or alienated. While there are some statutory exceptions, ERISA essentially prevents retirement assets from being joined in any ...

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    An early start on tax planning is always good, but this year it is essential. The Tax Cuts and Jobs Act fully rewrites the tax code effective January 1, 2018. To get the most benefit from the changes, while avoiding mistakes under them, update your tax and financial strategies ...

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    Question: Hello IRA Expert, I qualify for QCD (Qualified Charitable Distribution) as I am over 72 years old. I had recently read one of your articles on QCD and the 60-day rollover rule. I have automatic withdrawals of my RMD every quarter. The last automatic withdrawal was...

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    2018 is right around the corner. We will be dealing with massive changes to the tax code due to the enactment into law of the Tax Cuts and Jobs Act. Some of those changes are going to apply to you and some of those changes will affect your retirement and assets that you hope will...

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    We at the Slott Report would like to wish all our readers and their families a very happy holiday season! We thank all of you for taking your valuable time to read the Slott Report over the past year. We have heard from many of you and welcome your comments and feedback. Keep ...

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    Question: Good Afternoon Mr. Slott, Based on the Path Act of 2015, which made the QCD permanent, and the information from Checkpoint “2017 Tax Reform: Special Study on Individual Tax Changes in the ‘Tax Cuts and Jobs Act’”, it appears the Path Act of 2015 was not ...

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    Now that it looks like they’ve been spared from elimination in the most recent version of tax reform, it’s worth taking a look at nonqualified deferred compensation plans (“NQDC plans”). NQDC plans take different forms, including salary reduction arrangements, bonus ...

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    This is the season for charitable giving. And this year, it is especially so for those who want to get the most tax benefit from charity deductions before the new Tax Cuts and Jobs Act becomes law. The Act effectively reduces the tax-saving value of the charitable contribution ...

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    Question: ED, I have attended 3 of your 2 day past boot camps and plan to attend in Orlando in Feb. 2018. I NEED YOUR HELP BADLY NOW!!!! I think my broker dealer is not reporting RMD’s to charities properly on the 1099R’s they issue. They are putting the same number ...

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    Recharacterization is currently one of the few “do-overs” allowed under the tax code. Its days may now be numbered. The tax reform legislation currently pending in Congress would do away with recharacterization at the end of 2017. How Recharacterization Works Currently, ...

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    Question: Hello, I am a financial advisor in Dallas and appreciate all the training & education Ed has provided over the years to ML advisors like me. I have a question for Ed.  When meeting with a potential client, I uncovered a potential problem … And potential ...

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    Creating a self-directed IRA is relatively straightforward. It is not a creation of the tax code, but rather stems from the investment policies of the custodian that administers the IRA account. The agreement will allow you to diversify your IRA assets across a wide range of ...

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    This holiday season, consider giving the gift of a big head start on lifetime financial security to the children in your family by giving them funds to contribute to Roth IRAs. There's no lower age limit on having a Roth IRA as long as a child has earned income. And an early ...

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    Question: Ed – I read an article from you on delaying RMDs if still working and over age 70.5. Does the code allow (or address in any way) someone who works merely one day in the next calendar year to delay the RMD from the employer plan? For example, employee turns 70.5 on ...

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    In 2014, the Tax Court ruled that an IRA owner could do only one, IRA-to-IRA or Roth IRA-to-Roth IRA, 60-day rollover in a 12 month period. This rule applies no matter how many IRA and/or Roth IRA accounts the IRA owner might have. The 12 months is a full 12 months, not a ...

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    If you have an IRA, you should realize that what goes in must come out. In other words, your tax deferral will not last forever. Eventually, Uncle Sam will want his share. When you reach retirement age, required minimum distributions (RMDs) will kick in. Are you prepared? Take ...

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    If you have a 401(k) account or other employer sponsored retirement plan, you probably already know that a distribution before you reach age 59½ is going to be subject to a 10% penalty. One exception to the 10% early withdrawal penalty allows participants in a qualified plan to ...

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    Roth IRAs become 20 years old in January of 2018 and now hold more than $660 billion in retirement wealth, reports the Investment Company Institute (the source of the data in this article). Yet while Roth IRAs have become very popular among individuals who make annual ...

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    This week's Slott Report Mailbag looks into RMD rules and the "still-working" exception as it pertains to IRAs. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. You can find one in your area here....

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    While there is a lot of focus on the proposed tax law changes that have a target effective date of 2018, there is something we can count on for 2018, the inflation adjusted retirement account limits. There are currently no proposed changes to the following limits. IRAs The ...

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    House Republicans took the first shot at tax reform with the release of the Tax Cuts and Jobs Act on November 2. Now it is the Senate’s turn to weigh in. Not surprisingly, the Senate’s take on overhauling the tax code looks very different than the House version. You may ...

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    This week's Slott Report Mailbag examines inherited IRAs and retirees taking RMDs for the first time. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Question: I have a client who has ...

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    We continuously get questions on 60-day rollovers. Many times those questions revolve around a client receiving more than one distribution or wanting to complete the 60-day rollover with more than one distribution. Here is what you need to know. As a reminder, the ...

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    Are you approaching retirement age and not looking forward to being forced to take unwanted required minimum distributions (RMDs) from your retirement account? You may be looking for a way to delay those distributions. You may have heard about the “still-working” exception, ...

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    The much anticipated Republican proposal for tax reform has been released in the form of the Tax Cuts and Jobs Act, an over-400 page long major rewrite of the Tax Code.   It is sure to be controversial and subject to political dispute, and specific provisions are likely to ...

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    This week's Slott Report Mailbag looks into RMDs and spousal IRA beneficiaries. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Question: Hello, I need to take my RMD (Required Minimum ...

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    Every year more Baby boomers move toward age 70 ½ and their first required distributions from their retirement accounts. For those boomers born between July 1, 1946 and June 30, 1947, you turned 70 ½ in 2017. You now need to take your first required minimum distribution (RMD) ...

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    If you inherit an IRA, especially if it is a larger one, you may be afraid of being stuck with the five-year distribution rule. If this rule applies, your IRA must be entirely emptied in five years which can be a serious tax hit. Fortunately, you are much less likely to be stuck ...

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    In the past couple of weeks, I have heard the wrong answer to the question of where required minimum distributions (RMDs) must go to a trust beneficiary from both an advisor and an IRA custodian. The advisor was dealing with a special needs trust as the beneficiary of the IRA....

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    It’s Halloween season! This is the time for ghosts, witches, and trick or treating. What does Halloween have to do with your IRA? You might be surprised to hear that your IRA may be haunted. How can that be? Believe it or not, actions you take, or don’t take, can haunt your ...

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    This week's Slott Report Mailbag examines NUA rules and the "still working" exception. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Question: I really enjoyed reading The Retirement ...

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    We are frequently asked when required minimum distributions (RMDs) begin when an individual inherits an IRA. As with most things related to IRAs, the answer is, it depends. Year of Death RMD If a Traditional IRA owner died after their required beginning date (RBD) and did ...

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    Rothification is a term that is being tossed around a lot as tax reform takes center stage in Congress. What does Rothification mean? Proposals vary but, basically, it’s the idea of eliminating tax deductions and deferrals for retirement savings and instead mandating after-tax ...

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    This week's Slott Report Mailbag looks into 403(b) plans, RMDs, still-working exceptions, and trusts. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Question: I have a question in regards ...

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    In a post last week, we talked about the Roth recharacterization deadline which is fast approaching. October 16, 2017 is the last date to recharacterize a 2016 Roth conversion. Another important deadline that is coming up is for trusts that became the beneficiaries of ...

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    Millions of Americans were affected by Hurricanes Harvey, Irma, and Maria. You may be one of them. If you are, there is some encouraging news. On September 29, President Trump signed H.R. 3823, the “Disaster Tax Relief and Airport and Airway Extension Act of 2017” into law. ...

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    This week's Slott Report Mailbag examines RMDs when you are still working past 70.5 years old and inheriting multiple IRAs. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Question: I have ...

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    This is the story of Al, Bob and Carl. Each cousin is the non-spouse beneficiary of his father’s 401(k) plan. Their fathers worked together at the local automotive factory for their entire lives and were all covered by the same plan. The default distribution option in the plan ...

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    Did you convert your traditional IRA to a Roth IRA in 2016 and now you are reconsidering that move? Did you make a 2016 traditional IRA contribution and later discover the contribution was not deductible? Did you contribute to a Roth IRA, not knowing that your income was above ...

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    This week's Slott Report Mailbag examines 401(k)s, Roth 401(k)s, and spousal beneficiary rules. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Question: I have been getting Ed Slott and ...

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    Many times when individuals divorce the IRA is split between the spouses. This is done through the divorce decree or separation agreement. An IRA is never split using a qualified domestic relations order (QDRO). That is only used for splitting employer plans, such as 401(k)s....

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    As medical expenses continue to increase, planning for them in retirement takes on greater importance.  One approach is to shift thinking of the Health Savings Account (HSA) as an account to defray medical expenses annually to an account with pre-tax dollars and tax-free ...

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    Have you inherited an IRA? What type of IRA is it? Your answer will matter a lot when it comes to your tax bill. Inheriting a traditional IRA will have very different tax consequences than inheriting a Roth IRA. Consider the following example. Let’s say Tom named his three ...

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    Generally, when you receive a check from your IRA custodian or employer plan, you have 60 days to rollover the funds to another retirement account, either an IRA or an employer plan. As with most retirement plan rules, this rule comes with two exceptions – one good and one bad....

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    It doesn’t matter if it’s Memorial Day, the Fourth of July, or the dead of a blizzard-plagued winter…Millions of meat lovers across North America are now venturing outdoors to grill succulent pork, beef, chicken, and other delicious types of animal flesh. Mmmmm! The ...

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    The once-per-year rollover rule says that you can only roll over one IRA distribution from all of your IRAs (both traditional and Roth) in a one-year period. This is a tricky rule and many taxpayers have run into trouble with it. One area that can be very confusing is determining...

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    This week's Slott Report Mailbag looks into QCDs, RMDs, Rollover IRAs and Recharacterizations. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Question: I put $5,500 in my new Roth IRA for ...

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    Warning! The options described here are for spouse beneficiaries named on the beneficiary forms of IRA accounts. Non-spouse beneficiaries and spouses who inherit through an estate have a different sets of rules. Your spouse has died and you are named the beneficiary of their ...

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    No one can argue that the millennial generation faces big challenges when it comes to savings. Younger workers are dealing with record setting student loan debt, high housing costs and stagnant wage growth. It’s hard to save for retirement when you are worried about the next ...

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    This week's Slott Report Mailbag examines TDAs, IRAs, and prohibited transactions.  As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Question: I am a retired New York City educator who has a...

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    Here is a preview of what might come if Hurricane Irma hits the U.S. IRS and the Department of Labor (DOL) have made several announcements regarding various tax and retirement plan rules and deadlines that have been modified to allow relief for Hurricane Harvey victims. The ...

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    As the flood waters slowly recede in the Houston area, many people are asking themselves how they can help the victims of Hurricane Harvey. For those who have IRAs and are charitably inclined a Qualified Charitable Distribution (QCD) may be one way you can help. QCD Rules ...

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    This week's Slott Report Mailbag looks into QCDs, RMDs and inherited IRAs. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Question: Good afternoon. I have a quick question. Can a Roth ...

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    It is important to know what your IRA custodian will tell you and what they will not or cannot tell you. The I in IRA stands for individual and many times it is up to the individual to know things or keep track of them. 1. 60-Day Rollovers – An IRA custodian will not remind ...

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    Education is expensive. If you have children and you are concerned about how you will pay the school bills, you know that you cannot afford to overlook any possible option that may help you save. One savings tool that is frequently overlooked is the Education Savings Account ...

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    This week's Slott Report Mailbag examines Roth IRA transfers, QCDs and RMDs. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Question: Dear Ed Slott and Company, Thank you for helping me ...

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    It’s back to school time and the costs for college are quickly mounting. Where is the money going to come from? Many times individuals look to their retirement funds to pay higher education expenses. Can this be done and is it a smart move? There is an exception to the 10% ...

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    A well-known quote attributed to baseball great, Frank Robinson, says “Close doesn't count in baseball. Close only counts in horseshoes and hand grenades.” In a recent Tax Court Case, David D. Pritchard et ux. v. Commissioner; T.C. Memo. 2017-136 (July 10, 2017),the Court ...

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    This week's Slott Report Mailbag looks into the one-rollover-per-year rule, RMDs and the 10% early distribution penalty. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Question: A couple ...

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    On July 28, the Treasury Department announced that it was ending the myRA program. The Department issued a very brief statement saying that as part of the Administration’s effort to assess existing programs and promote a more effective government it was determined that this ...

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