If I pour too much water into a glass, removing liquid from a different glass does not correct the problem. The excess water must be removed from the “offending” receptacle. Such is the case with excess IRA contributions.
If you take a taxable withdrawal from your IRA or 401(k) (or other company plan) before age 59 ½, you normally have to pay a 10% penalty in addition to taxes. But Congress continues to carve out exceptions to this penalty, and there are now 20 available. In Notice 2044-55, the IRS recently gave us guidance on the new SECURE 2.0 penalty exceptions for withdrawals from IRAs and workplace plans to pay emergency expenses and for victims of domestic abuse.
More and more Americans have retirement savings in Roth 401(k)s. With their rising popularity come some complicated tax issues. These funds are often rolled over to Roth IRAs at retirement or when a participant changes job.
Question:
I have a question about the Roth IRA distribution ordering rules based on a client's situation:
1. The client is 45 years old.
2. She has had a Roth IRA open for five plus years.
You know the game “beer pong?” Arrange 6 or 10 cups in a triangle, fill each one with a couple of ounces whatever beverage you are enjoying, and your opponent tries to toss a ping-pong ball into one of the cups. If a throw is successful, the contents of that cup are consumed, and it is removed from the table. Rinse the ball off, and it’s your turn to try and toss it into one of the other person’s cups. The first person to eliminate each of his opponent’s cups wins.
A recent survey found that over 80% of 401(k) plans now offer employees the option of making Roth 401(k) employee contributions. More and more employees are now taking advantage of that opportunity. (In this article, I use the term “Roth 401(k) contributions” to also include Roth employees made to 403(b) and municipal 457(b) plans.)
Question:
Does a SIMPLE IRA owner who is over age 73 and still works for the same company that sponsors the SIMPLE IRA plan have to take an RMD (required minimum distribution)? He does not own any of the company.
You have been contributing to your IRA for years. The market is up, and you are watching those investments grow. Maybe you have rolled over funds to your IRA from your company plan. You may now have a significant balance. So far, you have taken smart steps toward a secure future. Don’t stop your careful planning there.
It is perfectly acceptable for a person to participate in multiple work plans in the same year (even at the same time). For example, a 401(k) and a SEP. Or maybe a 401(k) and another 401(k). However, care must be taken to follow IRS contribution limits and other guidelines. Unfortunately, people try to circumvent these rules all the time.
QUESTION: At age 80, after I take my required minimum distribution (RMD), can I then do a rollover from my...
