It’s no exaggeration to say that every time you turn around lately, there’s a new tax law or piece of IRS guidance that changes the tax and distribution rules for IRAs.
The Secure 2.0 Act, passed in December, contains more than 90 provisions affecting retirement-savings plans, such as individual retirement accounts and 401(k) workplace plans.
Advisors should take advantage of today’s low tax rates — and “do Roth conversions while taxes are on sale!” according to Ed Slott of Ed Slott & Co.
Every advisor, Slott told ThinkAdvisor Tuesday, “should be having this conversation with their clients. This may only last for the next three years (2023, 2024, and 2025). After that, tax rates are scheduled to revert back up to previous levels.”
What’s more, like 401(k)s, IRAs provide tax advantages to those who invest in them. If utilized properly, the Roth version of an IRA comes with tax-free withdrawals in retirement. And withdrawing money in retirement without owing any tax is the “holy grail,” says Ed Slott, a certified public accountant and founder of IRAHelp.com.
“You’re still supposed to pay an estimate of what you think you might owe,” says Ed Slott, a certified public accountant and founder of IRAHelp.com. If you fail to pay an outstanding bill by tomorrow, the IRS will tack on penalties and interest payments to what you owe.
Secure 2.0, the new legislation designed in part to beef up retirement savings, contains nearly 100 provisions—92 to be exact—pertaining to retirement.And even those who eat, breathe and sleep all things retirement are finding it a bit overwhelming.
This week, President Joe Biden released a proposed federal budget that would raise taxes on the wealthiest Americans to help address the solvency of key federal government entitlement programs such as Medicare and Social Security.
If you think saving for retirement is complicated, try figuring out how to withdraw retirement funds while minimizing taxes.
“As much as 70 percent of your hard-earned retirement funds can be eaten up by income, estate and state taxes,” says IRA guru Ed Slott, author of the retirement-planning books “Fund Your Future: A Tax-Smart Savings Plan in Your 20s and 30s” and “The Retirement Savings Time Bomb … and How to Defuse It.”
While a recent Investment Company Institute survey indicates that contributions to IRAs are low — likely because IRA rules are “complicated” — advisors are also confused about the rules, according to IRA and tax expert Ed Slott of Ed Slott and Co.
A $1 contribution today to a new Roth individual retirement account may not sound like much.But that seemingly small sum might save you a bundle in taxes down the road due to an under-the-radar timing requirement.
Your initial Roth IRA contribution starts the clock on something called the “five-year rule,″ said Ed Slott, a certified public accountant and IRA expert based in Rockville Centre, New York
