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Required Minimum Distributions and IRAs: Today's Slott Report Mailbag - Ed Slott and Company, LLC
By Andy Ives, CFP®, AIF®IRA Analyst QUESTION: If a client opens an IRA at age 75 and makes a contribution this year, this account would not have a required minimum distribution (RMD) for 2024, correct? Since the IRA did not exist last year, there is no 12/31/23 balance. ANSWER: You are correct, there would be no RMD in the scenario…
4 Things to Know About Rollovers Between Calendar Years - Ed Slott and Company, LLC
The IRA rollover rules are always tricky. However, if you are rolling over an IRA distribution when the calendar year changes, the rules can become especially challenging. Here are four things you need to know about rollovers as the year 2024 ends and the year 2025 arrives.
The QCD Dance - Ed Slott and Company, LLC
Tis the season for giving, and qualified charitable distributions (QCDs) are a popular way to donate to a favorite charity. However, rules must be followed. In a recent Slott Report entry (“QCD Timing,” December 4), I included the following closing line: “Some IRA accounts allow check-writing privileges. Checks written to a charity from a ‘checkbook IRA’ qualify as a valid QCD.
Who Must Take a 2024 RMD? - Ed Slott and Company, LLC
The holidays are upon us. There is shopping to do, gifts to wrap, and parties to attend. Amidst the hustle and bustle of the season, you may be forgiven if your retirement account is not at the top of your mind. However, for some retirement account owners and beneficiaries, a very important deadline is looming. December 31 is the deadline to take 2024 required minimum distributions (RMDs) for many individuals.
The Still-Working Exception and Roth Conversions in an RMD Year: Today’s Slott Report Mailbag - Ed Slott and Company, LLC
Question:If you continue to work past age 73, are you exempt from required minimum distributions (RMDs)? My 73 year-old wife is still working and contributing to her company's 401(k), and she doesn't own more than 5% of the company. Is she required to take out any RMD? Could you please clarify this rule for me? Thank you.
QCD Timing - Ed Slott and Company, LLC
Year after year, this topic continues to bubble up. Confusion exists over when a QCD can be done in relation to the RMD. Qualified charitable distributions (QCDs) can offset all or a portion of an RMD (required minimum distribution). However, for whatever reason, the sequencing of these items (QCDs and RMDs) confounds people. Let’s set the record straight, starting with some QCD fundamentals:
New 401(k) Provisions That Become Effective in 2025 - Ed Slott and Company, LLC
Get ready! Several new 401(k) provisions from the SECURE 2.0 Act kick in on January 1, 2025. One that we’ve already written about is the ability of employees to make extra catch-up contributions in a year they turn age 60, 61, 62 or 63 by the end of the year. (This “super catch-up” also applies to SIMPLE IRA participants.) Here are two others:
What We Are Thankful for at The Slott Report - Ed Slott and Company, LLC
Each year it is a Thanksgiving tradition here at the Slott Report to take a moment to give thanks for the rules that are helpful to retirement savers. There are many times when rules governing retirement accounts can seem illogical, confusing, and maybe even unfair. However, there are other rules that work well and give us the tools necessary to not only save for a secure retirement but maybe even get a few tax breaks along the way.
So Many IRA Beneficiary Variables! - Ed Slott and Company, LLC
When an IRA owner dies, what is the payout schedule for the beneficiary? The key to distinguishing the correct program (i.e., 10-year rule, stretch RMDs, 5-year rule, etc.) is to identify all the important variables. But there are so many! Nevertheless, each detail must be considered. Every scenario requires that we navigate through a mental flow chart. The correct answer lies at the end of every beneficiary maze.
Qualified Charitable DIstributions and Inherited IRAs: TOday's Slott Report Mailbag - Ed Slott and Company, LLC
Hello Ed Slott Team,We have a client with an IRA who wants to do a qualified charitable distribution (QCD) to a charity. The charity also has an account with the same custodian of the IRA and has asked that the client simply journal assets from her IRA directly to the charity’s account.
Tax-Free HSA Distributions - Ed Slott and Company, LLC
Health Savings Accounts (HSAs) continue to become more popular. If you have a qualifying high deductible health plan, you may make deductible contributions to an HSA. Then, you can take tax-free distributions to pay for qualified medical expenses. Here is what you need to know about taking tax-free HSA distributions.
Qualified Charitable Distributions and Required Minimum Distributions: Today’s Slott Report Mailbag - Ed Slott and Company, LLC
Question: If an IRA owner is over age 70 ½, can they do a qualified charitable distribution (QCD) even if their spouse makes a deductible traditional IRA contribution? Mark Answer: Hi Mark, There are some complicated rules that count deductible IRA contributions made after age 70 ½ against QCDs. However, these rules apply on a per person basis. What a spouse does is not considered. Your spouse can go ahead and make a deductible traditional IRA contribution. It will not affect your QCD. Question: In December of 2023 I requested a transfer of my IRA funds to a new custodian. The old custodian sent a check as a direct transfer to the new custodian, but as of 12/31 the check was “in the mail.” For RMD calculations, do I just forget these “in-the-mail dollars” (as they will be accounted for next year), or do I add the value of the outstanding check to the 12/31/2023 balance to calculate my 2024 RMD from my IRA with the new custodian? Thanks, Ryan Answer: Hi Ryan, The RMD rules do require you to adjust the 12-31 prior-year balance used to calculate RMDs for any outstanding rollovers or transfers. In your case, you would need to add the amount of the outstanding transfer into your 12-31-23 balance when calculating your 2024 RMD.
Roth IRA Conversion Considerations - Ed Slott and Company, LLC
Roth IRA conversions remain as popular as ever. However, based on some recent questions we’ve received, it is apparent that folks don’t fully understand all the nuances of this transaction. Here are some of the basic concepts and items of consideration:
INHERITED ROTH IRAs AND TRUST BENEFICIARY PAYOUTS: TODAY’S SLOTT REPORT MAILBAG - Ed Slott and Company, LLC
Question:For a non-spousal inherited roth IRA account, there seems to be contradictory advice on different websites about when to take distributions. Some say there are annual required minimum distributions (RMDs) within the 10 years; others say you can wait until the 10th year for a lump sum. If you can wait and don't need the money, wouldn't it be wiser to wait until the last year since the money compounds tax free and the final lump sum distribution would also be tax-free?
401(k) Contribution Limits Increase for 2025 - Ed Slott and Company, LLC
There is some good news for retirement savers! The IRS has released the cost-of-living adjustments (COLAs) for retirement accounts for 2025, and many of the dollar limit restrictions on retirement accounts will increase next year. In addition, new rules from the SECURE 2.0 Act also will bring more savings opportunities.
New Rule: All IRA RMDs Must Be Satisfied Prior to Doing a Roth Conversion - Ed Slott and Company, LLC
Yes, you read that title correctly. This rule was confirmed in the 2024 final SECURE Act regulations, released this past July. If a person has multiple IRAs, even if they are held at different custodians, the total aggregated IRA required minimum distribution (RMD) must be withdrawn before any Roth IRA conversion (or 60-day rollover) can be completed.
Trusts as the Beneficiary and Inherited IRAs: Today's Slott Report Mailbag - Ed Slott and Company, LLC
QUESTION:Hello,I’m working with a retired client who has a sizable IRA. He set up a trust and named it as the beneficiary of the IRA, assuming that the trust would reduce or eliminate the income tax liability. Is this the case? Also, does a trust circumvent the 10-year rule?Thanks!
Turn Your Clocks Back, and Pay Attention to the Roth IRA Clocks - Ed Slott and Company, LLC
Don’t forget to turn your clocks back this weekend!With that reminder comes another: pay attention to the Roth IRA distribution clocks. The key point to remember is that there are two different clocks, each used for a different purpose.
3 IRA Tasks to Complete by the End of 2024 - Ed Slott and Company, LLC
The year 2024 has flown by and the holidays season will soon be upon us. That means time is running out on year-end IRA deadlines. You will want to be sure to get the following three IRA-related tasks done sooner rather than later to avoid penalties and missed opportunities:
Inherited IRAs and the Once-Per-Year Rollover Rule - Ed Slott and Company, LLC
Question:I disclaimed one of my spouse's IRAs and it went to our two adult children. They are withdrawing RMDs from this account as well as contributing to their own Roth and IRA accounts. Are there any rules regarding whether the inherited required minimum distribution (RMD) must be taken prior to contributing to your own account?Jeanne
Higher Catch-Up Contributions Available for Certain Older Employees Starting in 2025 - Ed Slott and Company, LLC
The year is flying by, and before we know it 2025 will be here. With the arrival of the new year, several new provisions from the 2022 SECURE 2.0 law that impact retirement plans will become effective. One of the changes allows certain older participants in company savings plans and SIMPLE IRAs to make higher catch-up contributions.
QTIP Trusts and Successor Beneficiaries: Today’s Slott Report Mailbag - Ed Slott and Company, LLC
Question:We have a client who has children from a previous marriage. Upon the husband’s death, he wants to make sure his current spouse has access to income from his IRA. But he also wants to make sure the remaining balance, when she passes, goes to his children from his first marriage and not to someone else, e.g., her children.
You Missed the October 15 Deadline to Correct an Excess IRA Contribution – Now What? - Ed Slott and Company, LLC
October 15, 2024 has come and gone. This was the deadline for correcting 2023 excess IRA contributions without penalty. If you missed this opportunity, you may be wondering what your next steps should be. All is not lost! While you may not have avoided the excess contribution penalty for this year, you can still correct the issue for future years.
Nuances of NUA - Ed Slott and Company, LLC
By Andy Ives, CFP®, AIF®IRA Analyst We have written about the net unrealized appreciation (NUA) tax strategy many times. Generally, after a lump sum distribution from the plan, the NUA tactic enables an eligible person to pay long term capital gains (LTCG) tax on the growth of company stock that occurred while the stock was in the plan. But there…
The 10-Year Rule and Required Minimum Distributions: Today's Slott Report Mailbag - Ed Slott and Company, LLC
By Andy Ives, CFP®, AIF®IRA Analyst QUESTION: Good afternoon, If a client passed this year with four adult children inheriting equally, and each beneficiary is using the 10-year rule, how do they determine yearly required minimum distribution (RMD) calculations? Is it based on life expectancy or on a number that will empty the IRA within the 10 years? Thank you…
Tax Filing Relief and Retirement Account Withdrawal Options for Hurricane Victims - Ed Slott and Company, LLC
Victims of Hurricane Helene have at least a glimmer of good news when it comes to their tax filings and ability to withdraw from their retirement accounts for disaster-related expenses.The IRS usually postpones certain tax deadlines for individuals affected by federally-declared disaster areas. On October 1, the IRS announced disaster tax relief for all individuals and businesses affected by Hurricane Helene, including the entire states of Alabama, Georgia, North Carolina and South Carolina and parts of Florida, Tennessee and Virginia. Generally, the IRS extended the deadline to file certain individual and business tax returns and make tax payments until May 1, 2025. It is likely the IRS will provide similar relief for victims of Hurricane Milton.
Final Regulations Allow Separate Accounting for Trusts - Ed Slott and Company, LLC
The recent final required minimum distribution (RMD) regulations include a new rule change that may be beneficial for IRA owners who name trusts as beneficiaries. In the new regulations, the IRS allows separate accounting for RMD purposes for more trusts. This can be helpful when a trust has beneficiaries who can potentially have different payout periods under the RMD rules.
Surprising News About the New Statute of Limitations for Missed RMDs and Excess IRA Contributions - Ed Slott and Company, LLC
A big change made by the SECURE 2.0 Act of 2022 was adding a new statute of limitations (SOL) for the IRS to assess penalties for missed required minimum distributions (RMDs) and excess IRA contributions. On its face, it looks like the new SOL is 3 years for the missed RMD penalty and 6 years for the excess contribution penalty. But looks can be deceiving. In fact, for most of you, the new lookback period will be 6 years for both penalties.
Recharacterization Deadline Approaches - Ed Slott and Company, LLC
It happens. You have made a 2023 contribution to the wrong type of IRA. All is not lost. That contribution can be recharacterized. While recharacterization of Roth IRA conversions was eliminated by the Tax Cuts and Jobs Act, recharacterization of IRA contributions is still available and can be helpful in many situations you may find yourself in.
IRA Acronyms - Ed Slott and Company, LLC
When presenting a particular section of our training manual, I usually make the joke that, “if we were playing an acronym drinking game, we would all be on our way to a hangover.” The segment is titled: “Missed stretch IRA RMD by an EDB, when the IRA owner dies before the RBD.” This part of the manual discusses the automatic waiver of the missed RMD penalty in a certain situation, and the acronym soup is borderline comical. So that everyone knows which end is up, here is a spiked punch bowl of common retirement-account-related acronyms.
NEW SPOUSAL BENEFICIARY RULES AND EFFECTIVE DATE OF 10-YEAR RULE: TODAY’S SLOTT REPORT MAILBAG - Ed Slott and Company, LLC
Question: I inherited an IRA from a younger deceased spouse who wasn't required to take required minimum distributions (RMDs) until this year. Can I take advantage of the new section 327 rules under SECURE 2.0 since the RMDs haven't commenced yet?
What’s the First RMD Year for Those Born in 1959? - Ed Slott and Company, LLC
If you were born in 1959, what is the first year that you must start taking required minimum distributions (RMDs)? That would seem like an easy question to answer, but because of a snafu by Congress, it isn’t quite so clear.