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Question:Dear Ed,Thanks for all your work on the retirement frontier. I have a question…we have married clients who are age 70 (he) and 62 (she). Both clients have IRAs. The 62-year-old client just passed away. I know that the surviving spouse can rollover the decedent’s IRA into his IRA and the RMDs will begin (on the combined funds’ value) once he reaches 70.5. I also know that he can create an inherited IRA for the decedent’s IRA funds and does not have to begin taking RMDs until she would have been 70.5, but then has to take them according to the Single Life table if left in the Inherited IRA account. Is it possible for him to create an inherited IRA, receive his wife’s funds, allow them to grow for 8.5 years until she would have been 70.5, then roll them into his IRA account and use the Uniform Life table factor for future RMDs with the combined funds? It seems if this is possible, this would be the best strategy. Thanks for your help clarifying this issue.Best regards,Andy

Roth IRAs offer a trade-off. You decide to pay taxes now on your contribution (or conversion) in exchange for tax-free earnings down the road. Don’t miss out on Roth IRA benefits by making mistakes when you take a distribution. Here are six rules you need to know to make sure money comes out of your Roth IRA tax-free.1. Aggregate your Roth IRAs. For tax purposes, all of your Roth IRAs are considered one Roth account. There is no tax benefit gained by keeping conversions in a separate Roth IRA from your contributions. This is sometimes called the aggregation rule.2. Follow the ordering rules. Funds leave your Roth IRAs in a certain order. Contributed amounts are distributed first. Converted amounts are distributed next, first in, first out. Last out would be earnings.

Question:Hi Mr. Slott:I turn 70 ½ years old this year (D.O.B. 5-28-49) and must commence RMDs for an IRA total asset value as of 12/31/2018. When do I have to report this RMD on my tax return - before or no later than 4/15/2019? I have all my IRA funds with one custodian. Do they calculate the RMD or do I have to calculate? Also, my spouse has an employer 401a - can she aggregate the employer plan with all her other IRA funds for the RMD and withdraw from one of the IRA accounts, or does she need to segregate these two retirement classes (IRA vs 401a) and withdraw the RMD from each?Thanks for your help and looking forward hearing from you soon.Your Friend, Bob

When it comes to tax law and retirement planning, there are two things I like to talk about at the beginning of a new year: (1) some of most important rulings issued and laws passed in the prior year; and (2) the steps you can take today to improve your savings for retirement in the future. Since the topic du jour has been New Year’s resolutions, I want to tackle the second topic in this installment.

It’s Time to RetireAfter working with some of the best IRA minds in the business for the past 14 years, it is time for me to try out the “other side” – retirement.I have truly enjoyed working with all the advisors and clients I have met. I have spoken to large groups and small ones. I have travelled coast to coast to educate others about the IRA rules. I will miss it all.But it is time to move on and do some of the things that I have put off for a long time because I was “too busy” working to do them. It is time to slow down a little and smell the roses.Thank you everyone for all you have done for me and taught me. I leave you in good hands with Sarah, Jeremy and Andy, and, of course, with Ed.

In mid-November 2018, the IRS issued proposed regulations altering some of the rules governing hardship distributions from 401(k) and 403(b) plans. Most of the rules weren’t new; instead the IRS adopted changes that were issued in previous pieces of legislation, such as the Tax Cuts and Jobs Act, the Bipartisan Budget Act of 2018, and the Disaster Tax Relief and Airport/Airway Extension Act of 2017. The key takeaway from the proposed regulations is that the IRS has continued to chip away at some of the restrictions imposed by the tax code on hardship distributions.

Jerry sells widgets for the ACME Widget Company. Jerry is a hard-working employee who participates in the ACME Widget Company 401(k) Plan. Jerry also contributes annually to an IRA account at a local bank.The widget business is a fickle one. Some years Jerry can make up to $200,000, while in the down years he might only make $50,000. When Jerry’s income is high, he cannot deduct his IRA contribution because he is an active participant in his employer’s 401(k) plan. In those years, he makes nondeductible contributions to his IRA and diligently files Form 8606 to report them as such.In the slow years, when Jerry and his wife’s income is below the deductibility phase-out range for active participants, Jerry contributes to his IRA and takes the appropriate deduction on his taxes. Jerry maintains excellent records and knows exactly how much deductible vs. nondeductible money he has in his IRA.

Question:Hello Mr. Slott,Thanks for your educational broadcasts. I have run into something that might hold your interest. In two separate situations I have asked that retirement checks be made payable to an IRA at another large institution mailed FBO “my name” then mailed to me. One is IRA to IRA, the other is Qualified retirement plan by a former employer to an IRA.In both cases the sender has wanted to term the distribution as a rollover. I was able to get the coding on one changed after the fact (with much ado) and have not yet done the other. The IRS is clear that these are NOT rollovers:IRS publication 590-A: https://www.irs.gov/publications/p590a#en_US_2017_publink1000230589“A transfer of funds in your traditional IRA from one trustee directly to another, either at your request or at the trustee's request, isn’t a rollover. This includes the situation where the current trustee issues a check to the new trustee but gives it to you to deposit. Because there is no distribution to you, the transfer is tax free. Because it isn’t a rollover, it isn’t affected by the 1-year waiting period required between rollovers.”

Question:Mr. Slott,My spouse turned 70 on June 27th, 2018, so in December 2018 she will be 70 ½. She would like to complete a Qualified Charitable Distribution (QCD). Does the QCD need to be dated from December 27 to December 31, 2018 in order to take advantage of the favorable tax treatment for tax year 2018? Or, does she have all of calendar year 2019 to disburse her 2018 (and of course 2019 QCD) to meet the RMD requirements?Thank you for your advice.Ron

One piece of advice we commonly reiterate is, when you inherit an IRA or other retirement plan asset, touch nothing! That’s because many transactions cannot be undone, and the IRS rarely grants relief simply because the taxpayer misunderstood the tax rules. That said, you don’t want to remain stagnant forever. We were reminded of this in a recent private letter ruling approving a proactive approach by trust beneficiaries that saved the stretch distribution.