Question:My husband has taken two different qualified distributions from his Roth IRA within the last 60 days. We would like to "pay those back.” It looks like we can put money back into the Roth IRA as a rollover.My question is: Can we put the total amount of the two distributions back into the same IRA, or are we limited to "paying back" just one of those distributionsThanks,LauraAnswer:Hi Laura,Redepositing the funds back into the Roth IRA is considered a rollover. Unfortunately, only one of your husband’s withdrawals can be rolled back into his Roth IRA. He is not permitted to combine them and then roll the combined amount back.
A $1.4 trillion year-end spending bill was signed into law on December 20, 2019 in order to keep the government running. Tucked away inside this mammoth piece of legislation is the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which became effective January 1, 2020.This new law includes significant changes to retirement accounts, including:Age Limit Eliminated for Traditional IRA ContributionsBeginning in 2020, the new law eliminates the age limit for traditional IRA contributions (formerly 70 ½). Now, those who are still working can continue to contribute to a traditional IRA, regardless of their age.Age Limit Eliminated for Traditional IRA ContributionsBeginning in 2020, the new law eliminates the age limit for traditional IRA contributions (formerly 70 ½). Now, those who are still working can continue to contribute to a traditional IRA, regardless of their age.Age Limit Eliminated for Traditional IRA ContributionsBeginning in 2020, the new law eliminates the age limit for traditional IRA contributions (formerly 70 ½). Now, those who are still working can continue to contribute to a traditional IRA, regardless of their age.
1. What is a QDRO?A QDRO is a “qualified domestic relations order.” In plain English, it is a state court order obtained by divorcing parties that requires an ERISA plan to pay a portion of a participant’s benefit to the non-participant spouse. QDROs are an exception to the rule that prohibits an ERISA plan from paying benefits to anyone other than a plan participant or beneficiary.2. Can a QDRO be used for IRAs?No. QDROs are generally only for ERISA plans, and IRAs are not covered by ERISA. In a divorce situation, IRAs can be split via a divorce decree or property settlement agreement. Funds are transferred through a direct trustee-to-trustee transfer to an IRA in the name of the non-owner spouse.
Question:As year-end approaches, I have just exceeded my 2019 RMD, combining total QCD's during the year and my regular monthly IRA withdrawals.If I make additional charitable contributions from my IRA this month, are they still considered tax-advantaged QCD's, or has my QCD opportunity ended because I've already exceeded the annual RMD?Answer:This is an area where there is a lot of confusion! While you can use a qualified charitable distribution (QCD) to count toward your required minimum distribution (RMD), your QCDs for the year are not limited to the amount of your RMD.
Just like eating too much pumpkin pie with whipped cream isn’t good for your waistline, being a “top-heavy” retirement plan also may not be healthy.Sponsors of certain retirement savings plans must have their plan tested each year to determine if it is “top-heavy.” The top-heavy test is designed to make sure that lower-paid employees receive at least a minimum benefit if most plan assets are held for higher-paid employees.Section 401(k) plans are subject to top-heavy testing, unless the plan uses a “safe harbor” contribution formula. SEP-IRAs are also subject to testing, but most will automatically comply. Section 403(b) and 457 plans and SIMPLE IRAs are exempt from the top-heavy test.
Jenny earns a salary of $1,000,000. She is single and is not an active participant in a company retirement plan. Jenny can contribute $6,000 to a traditional IRA and deduct the full amount on her taxes. Benny, also unmarried, has a modified adjusted gross income of $76,000. He participates in a 401(k) at work. Benny can make a $6,000 contribution to a traditional IRA, but he is not allowed to deduct it. What gives? A person making a million can deduct an IRA contribution, but the person with a MAGI of $76,000 cannot? Is this another example of the rich getting richer?No, not really. The key factor driving eligibility for a deduction of a traditional IRA contribution is not salary or MAGI, but participation (or lack thereof) in a company retirement plan. When a person or their spouse is an “active participant” in a company retirement plan for any part of the plan year,
The Macy’s Thanksgiving Day Parade is a river of sights and colors and sound. A snappy marching band flows to an army of volunteers clutching the ropes of a six-story inflatable SpongeBob, swaying in the wind. Flag bearers and cheerleaders give way to a giant turkey in a Pilgrim hat being towed by a pick-up truck. Singers and dancers stream past and stilt walkers in Nutcracker outfits move with gaping steps. More towering balloons and more trumpets and more characters follow while the crowd oohs and ahs.
Roth IRAs first arrived over twenty years ago. A lot has changed since 1998. That was the year that Google was founded and an electronic pet called a Furby was one of the most popular Christmas gifts. However, some things haven’t changed so much. Impeachment is once again all over the news and here at the Slott Report we are still being asked many questions about how the five-year rules for Roth IRA distributions work. We probably get more questions on this topic than just about any other.
Question:I am over 71 and have 2 IRAs, one in my name, the other is inherited.Can I take one RMD from the inherited IRA to satisfy both?Or must I treat them separately and do 2 separate RMDs?Thank you!TylerAnswer:Hi Tyler,You must treat the IRAs separately and take two separate RMDs.If you own more than one IRA (not inherited), you can aggregate them and take the RMD from any one (or more) of them.
If you are charitably inclined and have an IRA, you might want to consider doing a Qualified Charitable Distribution (QCD) for 2019. The deadline for a 2019 QCD is fast approaching. It is December 31, 2019 and many custodians have even earlier cutoffs. Don’t miss out on this valuable tax break. Here are ten QCD rules you need to know.1. Must be Age 70 ½IRA owners who are age 70½ and over are eligible to do a QCD. This is more complicated than it might sound. A QCD is only allowed if the distribution is made on or after the date you actually attain age 70 ½. It is not sufficient that you will turn 70 ½ later in the year.2. Beneficiaries Can Do QCDsQCDs are not limited to IRA owners. An IRA beneficiary may also do a QCD. All the same rules apply, including the requirement that the beneficiary must be age 70 ½ or older at the time the QCD is done.
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