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We are constantly bombarded with requests to update our information. “Password needs updating.” “Software update for your mobile device.” “Please update your email so our marketing team can continue to fill your inbox with spam.” It is never ending. Most of these update requests are trash. An automatic delete. However, some updates are vitally important and demand our attention. Regarding retirement accounts and IRAs, here is a countdown of five critical items that should be considered, reviewed and updated immediately:

Maybe you made a Roth IRA contribution for 2021, but your income was too high. Maybe you made a traditional IRA contribution without having any earned income. These are both examples of excess IRA contributions. The bad news is that excess IRA contributions happen can easily and often. The good news is that if you properly correct the contribution, you can avoid penalties.

Question: Late in December, 2021, a taxpayer (under age 59 ½) takes a distribution of his (traditional, not Roth) 401(k), and has 20% withheld for Federal tax. Early in January, 2022, the full 100% of the distribution is deposited in a Roth IRA. Does this avoid the 10% penalty for early distribution? Is this reportable as a Roth conversion in 2022 or 2021?

More and more 401(k) plans now offer Roth contributions. At the same time, Americans are changing jobs and receiving 401(k) distributions in record numbers. So, it’s a good time to review the tax rules that apply to Roth 401(k) withdrawals. (The same rules also apply to Roth 403(b) and Roth 457(b) withdrawals.)

Qualified Charitable Distributions (QCDs) are a common transaction these days, but all guidelines must be followed to ensure the QCD is valid. Recent court cases have exposed the absolute necessity to adhere to the rules…or the donation could be disallowed.

Question: I turn 72 in 2023. If I wait to take my first RMD until 4/1/24, do I calculate it using my IRA balance on 12/31/23 or on 12/31/22? I think 12/31/22, but do not want to assume. I can't find a clear answer in Pub 590-B. Tim Answer: Tim,

According to many recent surveys, the fall months of September and October are overtaking June as the most popular time of year to tie the knot. If your wedding is approaching in the next few months, the last thing you may be thinking about is your retirement account, but when it comes to IRA rules, marriage has its benefits. Here are three IRA rules you should know before you walk down the aisle:

A recent federal court case from West Virginia illustrates that the spouse of a 401(k) participant usually has no right to prevent the plan from paying the participant a lump sum distribution. In Gifford v. Burton, a Mr. Gifford (his first name is omitted in the decision) was an optician at Walmart and a participant in the Walmart 401(k) plan. He was married to Sara Gifford, who was his sole beneficiary under the plan. In February 2021, Mr. Gifford received a distribution of all of his 401(k) funds and deposited those funds into an IRA. He then designated his daughter, Emma Gifford, as 90% beneficiary of his IRA and wife Sara as 10% beneficiary.

Question: By law I must withdraw a certain percentage from my retirement accounts to meet the required RMD. And I will have to pay income taxes on that amount. The percentage amount I must withdraw is based on the value of the account as of December 31, 2021 at which time the market was very high.

This may seem like a rudimentary topic, but it is the basics that are often so confusing. A fundamental understanding of Roth IRA distributions is essential for Roth IRA owners. In a blog post from June 8 (“One Roth IRA Bucket”), I created a scenario where a person had five Roth IRAs, a couple of traditional IRAs, and was doing Roth conversions. The point of that exercise was to demonstrate how the IRS knows what dollars within all of a person’s Roth IRAs are contributions, what are conversions, and what are earnings.