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As I write, Hurricane Dorian is pummeling the Bahamas, churning the ocean and producing catastrophic damage. Godspeed, Freeport. Forecasts suggest the storm will sweep north and brush the east coast of Florida, which is where I live. Hurricanes are nothing to trifle with. I have survived them before and know how to prepare. Should the storm bobble west and deliver its winds farther inland, we stand ready to evacuate. Some family members up the coast have already departed. In the interim, we will monitor the news, assess liabilities, implement strategies and act accordingly. That is our plan.

The calendar is turning to September and Starbucks is once again selling pumpkin spice lattes. It’s back to school time! We can all agree that education is expensive. If you have children, you know that you cannot afford to miss out on any possible option out there that may help you save. One savings tool that is frequently overlooked is the Coverdell Education Savings Account (ESA). Contributions You may establish an ESA with the custodian of your choice and the paperwork you complete is very similar to the paperwork necessary to establish an IRA. Contributions are made to the account to help save for education expenses of a designated beneficiary.

Question: Hello, I have an IRA from my deceased father. The beneficiary is my mother, but she passed on before my father. The IRA custodian is saying this doesn't go through the estate but directly to me. I thought all IRA's that don't have a living beneficiary go through the estate. Can you help me understand this? Answer: Sorry about your loss. If your father chose a contingent beneficiary (to receive the funds in case your mother died before he did), then his IRA would go to that contingent beneficiary.

Every year thousands of traditional IRA account owners turn 70 ½ years old. In addition, each year thousands of younger non-spouse beneficiaries inherit traditional and Roth IRA accounts. What do these two groups of people have in common? They all must begin taking RMDs. Here’s the kicker – what’s the chance that every single one of these thousands of people fresh to the world of required minimum distributions A.) realizes they need to take an RMD; B.) knows the deadline for taking the RMD; and C.) actually takes it?

Question: We found a discussion on your website’s discussion board in 2011 regarding 60-day rollovers straddling two calendar years. We are trying to confirm that a rollover would still be valid even if the Form 1099-R and 5498 may be issued in two different years. Answer: This is a question that comes up frequently. As long as all the rollover requirements are met there is no problem with a rollover that straddles two tax years. For example, you may have funds distributed late in the year that are not rolled over until the next year. If this is your situation, you will report the rollover transaction on your tax return for the year of the distribution.

You may know that you participate in a DC retirement plan. But what exactly does that mean? (Hint: It doesn’t mean that your plan is sponsored by the District of Columbia.) “DC” actually stands for “defined contribution” plan. Defined contribution plans are a type of company retirement plan and are distinguished from DB (“defined benefit”) plans/ Types of DC plans. The most popular types of DC plans are 401(k) plans, 403(b) plans and 457(b) plans. Each of these types allows employees to make salary deferrals and may also allow employer contributions. 401(k) plans are for employees of private sector companies. Thrift savings plans (TSPs) are similar to 401(k) plans and are for employees of the federal government and for the military. 403(b) plans (also known as tax-sheltered annuity or TSA plans) are for employees of public schools,

Question: Hello, I have heard Ed speak at several different Wells Fargo events and he spoke one time about clients who over contribute to their 401(k). I believe there was a strategy where they can move the excess to an IRA. Can you tell me where to find more info on this strategy? Answer: There is no strategy to move an excess 401(k) contribution to an IRA. To avoid being taxed twice, excess plus earnings attributable must be removed by April 15th of the year after the year the excess was contributed. There is no way to “fix” it with a rollover or some other transfer as the excess is ineligible to be rolled over. The combined allowable amount contributed to a 401(k) by employer and employee is $56,000 in 2019 ($62,000 over age 50), and that cap cannot be breached.

The Setting Every Community Up For Retirement Enhancement (SECURE) Act recently passed the House of Representatives by a large margin. It is currently stalled in the Senate. This bill includes a multitude of provisions that would reshape retirement savings if passed. Buried deep within the proposed legislation is a provision that would do away with the stretch IRA for most beneficiaries. We have received many questions on this provision. Here are a few of the most common:

Participating in a company plan, like a 401(k) or 403(b) plan, is a great way to save for retirement. But to make sure that employees don’t use those plans as checking accounts, Congress has imposed limits on when you can withdraw your funds. Generally, you can’t receive a distribution until severance from employment, disability or death. Most plans also allow payouts after age 59 ½ - even if you’re still working – and allow you to borrow against part of your account while still employed. Beyond that, your plan may (but isn’t required to) let you pull out your funds to take care of a financial hardship. Here’s a quick summary of how hardship withdrawals work:

Many company retirement plans – like a 401(k) – offer company stock as an investment option. Under special tax rules, a plan participant can withdraw the stock and pay regular (ordinary) income tax on it, but only on the original cost and not on the market value, i.e., what the shares are worth on the date of the distribution. The difference (the appreciation) is called the net unrealized appreciation (NUA). NUA is the increase in the value of the employer stock from the time it was acquired to the date of the distribution to the plan participant. The plan participant can elect to defer the tax on the NUA until he sells the stock. When he does sell, he will only pay tax at his current long-term capital gains rate – even if the stock is held for less than one year. To qualify for the tax deferral on NUA, the distribution must be a lump-sum distribution. This means the entire plan must be emptied in one calendar year, including all non-company stock within the plan.