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When it comes to taxes and the 10% early distribution penalty, do not allow the underlying investments within a Traditional IRA to confuse what is applicable. Earnings within an IRA are just earnings. It does not matter if those earnings come from appreciation, capital gains, dividends, rents, annuity income, interest, or really any other form of growth. If it happens within the IRA, it is essentially just “earnings.”

It’s hard to keep up with the news out of Washington these days! We have been getting a ton of questions on how the new tax proposals recently passed by the House Ways and Means Committee would impact Roth conversions. Here is the rundown.

Congress designed 401(k) plans as retirement savings vehicles – not as checking accounts. So, there are restrictions on when employees can make “in-service withdrawals” (i.e., withdrawals while still working).It’s important to remember that while 401(k) plans must abide by these withdrawal rules, plans are free to impose even more restrictive rules. So, you’ll need to check your plan summary or ask your plan administrator or HR rep for the particular withdrawal rules that apply to you.

In most states the legal age for alcohol consumption is 21. And you must actually be 21. When you hand your driver’s license to the bouncer and he shines a little flashlight on your date of birth, it is not good enough to say you will be turning 21 in a couple of months. Unless today is your 21st birthday or later, the bouncer will wave you away, denying access to the premises.

The House Ways and Means Committee has released a draft of proposed changes to retirement accounts, including adding income limits for conversions and eliminating the back-door Roth conversion strategy. These proposals are designed to raise revenue and are likely, at least in part, a response to recent headlines about large Roth IRAs held by billionaires. Unless otherwise noted, the proposals would be effective for 2022. Here is what this means for your retirement account.

Are you moving assets between IRAs or from a company plan to an IRA (or vice-versa)? You should know that using a direct transfer is a much better idea than doing a 60-day rollover. Direct transfers avoid all of the possible issues which can occur with 60-day rollovers:

By Ian Berger, JDIRA AnalystFollow Us on Twitter: @theslottreport What if you have an IRA with your spouse as primary beneficiary,...

Question:I appreciate all of the information you pass along, both through PBS and now through the American College. In one of your recent presentations, you discussed QCDs and their often-overlooked value. I recommend QCDs to “eligible” clients. Since the adoption of the new age 72 for RMDs, the question I have is this: As I understand the rules, people who are age 70 1/2 or older can do QCDs up to $100,000 annually. But now RMDs don’t start until age 72. Does this create a “split” definition as to who can use QCDs? That is to say, is there a gray area for those in the “gap” for the beginning age for RMD's?

In the August 16, 2021 Slott Report, we showed that someone participating in a 401(k) plan through a “regular” job could also establish a solo 401(k) plan through a side job and potentially contribute up to $58,000 this year in after-tax contributions to the solo plan. However, this only works if the company sponsoring the regular 401(k) plan and the entity sponsoring the solo 401(k) (e.g., a sole proprietor) are considered unrelated under IRS rules.

Recently, I had a conversation with an advisor who wanted a second opinion. He disagreed with how a 401(k) custodian was handling his client’s required minimum distribution (RMD). To arm himself with facts, the advisor contacted us so he could push back on that custodian.