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IRA Transfers and Qualified Charitable Distributions: Today's Slott Report Mailbag - Ed Slott and Company, LLC
Hello, I have two IRA annuities with different insurance companies. One of my annuities is maturing and I would like to transfer it upon maturity to a different insurance company. Do I need to take my 2025 required minimum distribution (RMD) from the current insurance company prior to transferring the funds to a new insurance company offering a higher rate, or can I take it after the transfer?
When You SHOULD Name a Trust as IRA Beneficiary - Ed Slott and Company, LLC
Here at the Slott Report we hear many stories about trusts being named as IRA beneficiaries and the problems that follow. Often, there seems to be no purpose for naming the trust and it brings unnecessary complications. Trusts won’t help with income taxes. In fact, they can increase the tax hit because IRA funds may be subject to high trust tax rates.
Fixing a Converted RMD…and the Tax Reporting - Ed Slott and Company, LLC
Regardless of the topic, we could all use an occasional refresher. Retirement account rules are incredibly complicated, and we all have our blind spots. Even seasoned financial advisors with extensive client lists can overlook certain details. I had a conversation recently with a respected professional who was operating on a misconception regarding the still-working exception. Fortunately, we were able to identify the oversight and make the necessary corrections. But the conversation confirmed, once again, that understanding the rules is paramount to success.
Chocolate, Vanilla or Strawberry: How 401(k), 403(b) and 457(b) Plans Compare - Ed Slott and Company, LLC
Like Neapolitan ice cream, most company retirement savings plans come in three flavors: 401(k) plans if you work for a for-profit company or you’re a business owner with no employees; 403(b) plans if you work for a tax-exempt employer, a public school or a church; and 457(b) plans if you work for a state or local government.
Using Your IRA to Buy Your First Home - Ed Slott and Company, LLC
With home prices continuing to soar, many first-time homebuyers are looking for any possible source of funds to tap. IRA savings are intended to be used for your retirement. However, if you are like many others, your IRA may be your biggest asset. You may need your IRA money to make homeownership happen, and there is a special break in the tax code that can help if you qualify.
Inherited Roth IRAs and IRA Transfers: Today's Slott Report Mailbag - Ed Slott and Company, LLC
Question: Hello, I have a question concerning inherited Roth IRAs. I know that in the past you have said that no annual required minimum distributions (RMDs) are required for these accounts. Does this include Roth IRAs that were inherited prior to the SECURE Act changes? There is so much confusion about Roth IRA RMDs, so I wanted to be sure.
Misconceptions About the Still-Working Exception - Ed Slott and Company, LLC
Regardless of the topic, we could all use an occasional refresher. Retirement account rules are incredibly complicated, and we all have our blind spots. Even seasoned financial advisors with extensive client lists can overlook certain details. I had a conversation recently with a respected professional who was operating on a misconception regarding the still-working exception. Fortunately, we were able to identify the oversight and make the necessary corrections. But the conversation confirmed, once again, that understanding the rules is paramount to success.
Backdoor Roth Conversions and IRA Losses: Today's Slott Report Mailbag - Ed Slott and Company, LLC
Thank you for all you do to educate the public. I’m hoping you guys can settle a debate that’s been going on with a few financial advisors and CPAs regarding the 5-year rule for Roth IRA conversions. I was under the impression that a non-taxable conversion can be withdrawn at any time, even within 5 years of the "backdoor" contribution/conversion, without a 10% penalty.
Taking Tax-Free Distributions from Your HSA - Ed Slott and Company, LLC
Health Savings Accounts (HSAs) may be one of the biggest tax breaks currently available. If you have a qualifying high-deductible health plan, you may make a deductible contribution to an HSA. There are no income limits for eligibility to contribute. You can then take tax-free distributions from your HSA to pay for qualified medical expenses.
Self-Certification After 60 Days: 12 Reasons - Ed Slott and Company, LLC
There are two ways to move money from one IRA to another: a direct transfer or a 60-day rollover. With direct transfers, the funds are sent directly from one custodian to another. The IRA owner has no ability to use the dollars while they are in transit, and the transaction does not create any tax reporting. A direct transfer can be processed electronically, or a check can be sent.
First RMD Year and Roth IRA 5-Year Period: Today’s Slott Report Mailbag - Ed Slott and Company, LLC
Question: Our client is 75 years old. He just retired on January 1, 2025. The company has recognized his retirement date as being January 1, 2025. When must he take his first required minimum distribution (RMD)? Rick
How the Compensation Limit Affects Retirement Plan Benefits - Ed Slott and Company, LLC
Many retirement plans base employer contributions on employee compensation. For many years, Congress has limited the compensation that can be taken into account for those contributions. Fortunately, this dollar limit only applies to very highly paid employees.
New Reporting for 2025 QCDs - Ed Slott and Company, LLC
The IRS has introduced a new code for the reporting of qualified charitable distributions (QCDs) by IRA custodians on Form 1099-R. How QCDs Work QCDs first became available in 2006, and they were made permanent in 2015. The strategy has become increasingly popular among IRA owners who are charitably inclined. With a QCD, IRA owners or beneficiaries who are at least age 70½ make a tax-free donation to charity directly from their IRA. An important benefit of a QCD is that it can be used to satisfy a required minimum distribution (RMD).
Roth Conversions and 401(k) Distributions: This Week's Slott Report Mailbag - Ed Slott and Company, LLC
Question: Since I retired in 2020, each year I have been converting amounts from my employer plan to my Roth IRA. I will be age 73 in 2026. Can I take my required minimum distribution (RMD) amount and convert that to my Roth IRA?
Check Both Boxes for Tax-Free Roth IRA Earnings - Ed Slott and Company, LLC
Roth IRAs follow strict distribution ordering rules. Contributions come out first, then converted dollars, and then earnings. It does not matter how many Roth IRAs a person has, or if the accounts are held at multiple custodians. The IRS doesn’t care. All the IRS sees is one big Roth IRA bucket, and within that consolidated Roth IRA bucket, there are only three types of dollars: contributions, conversion, and earnings. Any distribution from any Roth IRA follows the ordering rules – contributions first, converted dollars second, earnings last.
Roth IRAs and Required Minimum Distributions: Today's Slott Report Mailbag - Ed Slott and Company, LLC
QUESTION: My wife and I created a Roth IRA when our two children were young to pay for their college education. Our daughter is finishing her second year of school, and our son will be entering college this fall. We have withdrawn $30,000 so far from our contributions to pay her expenses. The current value of the Roth IRA is over $150,000.
Basis In Your Traditional IRA - Ed Slott and Company, LLC
While most distributions from a Traditional IRA are taxable, sometimes distributions can include after-tax dollars. These after-tax dollars are known as “basis.” Handling and tracking basis in your Traditional IRAs can be challenging, but it is important to get it right. If mistakes are made, double taxation can occur. That is a result no IRA owner wants.
72(t): Switching Methods in a Market Downturn - Ed Slott and Company, LLC
When a person under the age of 59½ needs access to his IRA dollars, there is a 10% early withdrawal penalty applied to any distribution, unless an exception applies. One of the many 10% penalty exceptions is a 72(t) “series of substantially equal periodic payments.” Due to the possibility of errors over the required duration of such distribution schedules, it is our opinion that establishing a 72(t) should be the last resort.
RMD Calculation and Direct Roth Conversions: Today’s Slott Report Mailbag - Ed Slott and Company, LLC
Question: At age 71, I’m not yet subject to required minimum distributions (RMDs) from my IRA or workplace retirement accounts. However, I am required to take annual RMDs from a pre-2020 inherited IRA and a pre-2020 inherited Roth IRA.
After-Tax 401(k) Contributions Shouldn’t Be an Afterthought - Ed Slott and Company, LLC
With the popularity of Roth 401(k) contributions, after-tax (non-Roth) employee contributions have gotten short shrift. But, if your plan offers them, after-tax contributions are worth considering. They can significantly boost your retirement savings and can sometimes be funneled into Roth accounts while you’re still working.
3 Retirement Account Moves You Can Still Do for 2024 - Ed Slott and Company, LLC
The April 15 tax-filing deadline has come and gone. However, for some 2024 retirement account planning strategies, it's not too late! There is still time beyond the April 15 deadline. Here are three retirement account moves for the 2024 tax year that are still available to make in 2025.
Once-Per-Year Rollover Rule and RMD Aggregation: Today's Slott Report Mailbag - Ed Slott and Company, LLC
Question: Are rollovers done by a spouse beneficiary subject to the once-per-year IRA rollover rule? The IRA funds were never distributed to me. They were directly transferred from my deceased husband’s IRA to my own IRA. Everything was done electronically at the same firm. I’m being told that the second transfer is taxable
NUA: “Resetting” Cost Basis - Ed Slott and Company, LLC
The recent market ride has been nuts. It is certainly no fun for anyone who owns stock or stock funds. Many of us are experiencing the same sensation in our gut as when a roller coaster click, click, clicks to its apex and then plummets over the edge. (That’s why I don’t ride roller coasters anymore.) Wild swings in the market result in sleepless nights for many. But for those with a long-term view, there is a potential silver lining in this storm cloud.
Still Waiting for IRS Guidance on IRA Self-Correction Program - Ed Slott and Company, LLC
In the 2022 SECURE 2.0 legislation, Congress gave the IRS two years – until December 29, 2024 – to come up with rules allowing IRA owners to fix certain mistakes through self-correction. Alas, December 29, 2024 has now come and gone, and we’re still waiting for those rules.
Rollovers and Required minimum Distributions: Today's Slott Report Mailbag - Ed Slott and Company, LLC
QUESTION: A 401(k) plan participant over age 73 wants to roll over his account to a new IRA. I understand that he must take a required minimum distribution (RMD) before the rollover. Is an additional RMD required in the same year from the IRA?
Will Market Volatility Mean RMD Waivers for 2025? - Ed Slott and Company, LLC
Recent turmoil in the markets has hit many retirement savers hard as they see their IRA and 401(k) balances rapidly shrinking. For many, the age-old advice to stay the course for the long term and not cash out too soon applies, but for those who are age 73 or older, the rules requiring required minimum distributions (RMDs) present a hurdle.
Who Can Use a 10% Penalty Exception? - Ed Slott and Company, LLC
As a follow up to the March 26 Slott Report entry that included a full list of the 10% early withdrawal penalty exceptions (“10% Penalty Exceptions: IRAs and Plans”), here we get a little deeper into the weeds on some of the nuances of certain exceptions. As mentioned in the March 26 article, some exceptions apply to plans only, some to IRAs only, and some to both.
Deferral of First RMD and RMDs for Roth IRAs: Today’s Slott Report Mailbag - Ed Slott and Company, LLC
Question: My wife turns 73 years old in August 2025. My understanding is that she has until April 1, 2026, to take her first required minimum distribution (RMD), in which case she would wind up taking two RMDs in 2026.
Make Your 2024 IRA Contribution by April 15 - Ed Slott and Company, LLC
There is still time! You can still make a prior-year (2024) IRA or Roth IRA contribution up to the tax filing due date, April 15, 2025. For most people, there is no extension beyond that date, regardless of whether a tax return extension is filed.
10% Penalty Exceptions: IRAs and Plans - Ed Slott and Company, LLC
If a person under age 59½ takes a withdrawal from his IRA or workplace plan, there is a 10% early withdrawal penalty…unless an exception applies. There are currently 20 exceptions, with a 21st on the way. Here are those exceptions, with some brief commentary.
Surprise! You May Still Be Eligible for the Stretch IRA - Ed Slott and Company, LLC
The arrival of the SECURE Act means the end of the stretch IRA for many beneficiaries. Instead, a 10-year payout rule applies for most IRAs inherited by non-spouse beneficiaries. However, the SECURE Act does allow the stretch to continue for certain select groups of beneficiaries. These beneficiaries are called “eligible designated beneficiaries” (EDBs).
IRA Trivia: Missed RMD or Excess Contribution? - Ed Slott and Company, LLC
Here is an all-too-common situation that seems counterintuitive: A participant in a 401(k) retires and must take his required minimum distribution (RMD). This person requests that his entire 401(k) plan balance be directly rolled over to an IRA. The plan follows the participant’s direction, and the entire amount is sent to the IRA.
Inherited Roth IRAs and Qualified Charitable Distributions from SEP IRAs: Today’s Slott Report Mailbag - Ed Slott and Company, LLC
Question: Hi, In a recent blog post, you addressed the complicated rules for a 401(k) to Roth IRA rollover. I have a similar question as it relates to a pre-tax IRA conversion to a Roth IRA.
Avoid Double Trouble by Fixing 2024 Excess 401(k) Deferrals by April 15 - Ed Slott and Company, LLC
Everyone knows that April 15, 2025, is the deadline for filing 2024 income tax returns. But April 15 is also a crucial deadline if you made too many 401(k) deferrals in 2024. If you don’t fix the error by that date, the tax consequences are serious. Having a tax filing extension for 2024 does NOT give you more time.