We say in our training manuals that “the SECURE Act obliterates IRA trust planning.” That’s an aggressive word – “obliterates” – but it is accurate. We also shout from the mountain top that every trust created prior to the SECURE Act and named as an IRA beneficiary must be reviewed, potentially rewritten, or scrapped altogether. What was a perfectly effective planning strategy a couple of years ago could be totally useless now. Here’s how and why…
If you’re an IRA beneficiary subject to the 10-year payout period and would have had a 2023 RMD (required minimum distribution), you’re in luck. In Notice 2023-54 issued last Friday (July 14), the IRS said it would excuse those RMDs. The IRS also said it would extend the 60-day rollover deadline for IRA (and plan) account owners born in 1951 who received distributions in 2023 that weren’t necessary because of the SECURE 2.0 change that delayed their first RMD year from 2023 to 2024.
QUESTION:Dear Mr. Slott,I have a client who, during 2022, was separated from employment, turned 55, and took a distribution from his former employer’s 401(k) account. We properly used the Rule of 55 exception to avoid the 10% early withdrawal penalty. During 2023 (without consulting me), he rolled the remaining balance of that former employer’s 401(k) account into an IRA, and THEN took a distribution from that IRA account. Does the 10% penalty apply to this distribution?Thanks,
You can have too much of a good thing. While it is a good strategy to contribute to an IRA, some contributions are not allowed. When a contribution is not permitted in an IRA, it is an excess contribution and needs to be fixed. Some excess contributions are pretty easy to understand. Others are a little more complicated. Here are 5 ways an excess IRA contribution can happen:
Oftentimes with these articles, I compare certain retirement account rules to arbitrary items. A creative metaphor or simile can help the reader grasp a concept. For instance, past entries have referenced revolving doors, hurricane preparedness, Bloody Mary cocktails, Charlie Brown’s Halloween costume, genies in lamps and even Indiana Jones. But I was struggling. No single comparison seemed to carry the weight necessary to create an entire Slott Report submission. So, here is a 6-pack of random summertime similes and other retirement account comparisons.
Question:I believe we are all waiting for the IRS to issue rules related to distribution requirements (or not) for beneficiaries who are subject to the 10-year rule under the SECURE Act. Where is the clarification for 2023? In my situation, my children are beneficiaries who inherited an IRA from Grandma, who passed away in 2022.
In her June 28, 2023 Slott Report post, Sarah Brenner discussed several reasons why it pays to roll over your retirement plan savings to an IRA. Another option is to keep your funds in the plan. Keep in mind, though, this may not always be possible. Sometimes your plan may force you to take your dollars out, for example when you reach the plan’s retirement age (normally, age 65) or if you have a small account balance.
Question:Ed Slott and Team,I am 73 and a retired financial planner. I would like to do a partial withdrawal from my 403(b) and do a 60-day rollover back into the same 403(b). Can I do this, or do I have to do the 60-day rollover to a different 403(b) or IRA?Please let me know at your earliest convenience.
If you are like most American workers, you will change jobs many times during your lifetime. With a job change, you will have a decision to make. What should you do with the funds in your retirement plan? One option is to do a rollover to an IRA. An IRA rollover offers some big benefits.
When an IRA owner dies, we look to the beneficiary form to determine who should receive the IRA funds. After death, there is a transition process as assets are moved into an inherited IRA for the beneficiary. But what if the beneficiary dies after the death of the original IRA owner, but prior to claiming the account?
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