In the wake of IRS Notice 2014-54, this question is coming up a lot. Can you roll only after-tax 401(k) funds to a Roth IRA? The answer is that you are NOT limited to moving only after-tax employer plan funds to a Roth IRA.
Most people are familiar with the basic rules for the pre-tax salary deferrals and employer contributions that are the most frequent types of money found in 401(k) and similar plans. Few, however, are aware of the rules for after-tax contributions to the “traditional side” of such plans and the unique rules and planning opportunities that can present themselves. That’s begun to change over the last week, however, since the release of IRS Notice 2014-54, which provided exceptionally favorable guidance for people with after-tax money in their 401(k) and similar plans.
Since you have unlimited access to your IRA funds, you might be tempted to use your IRA for personal use. While you are allowed to take an IRA distribution at any time, and for any reason, the IRA distribution will be taxable to you if you don’t roll it over within 60-days of receipt. So, in order to avoid having to pay federal income taxes on an IRA distribution, you might think to try and take a loan from your IRA instead. Unfortunately, taking a loan from your IRA could actually cost you MORE in taxes than taking an IRA distribution.
You or your client has several retirement accounts. Can you take the required minimum distribution (RMD) from just one account? The answer is maybe. Let’s start with what you cannot do. You cannot take the RMD for one type of account from a different type of account.
This week's Slott Report Mailbag looks at utilizing the pro-rata rule to calculate tax consequences for your Roth IRA conversion plus what life expectancy table an IRA inheritor should use to calculate their RMDs (required minimum distributions) moving forward. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. You can find one in your area here.
Moments ago the IRS released new guidance – IRS Notice 2014-54 – regarding distributions from company retirement plans when there are both pre and post-tax money in those accounts. For years now, one question has plagued both plan participants and financial advisors alike… “If someone has a 401(k) with pre and post-tax money, can they take a distribution and roll (convert) just the post-tax money to a Roth IRA tax-free, while rolling the remaining pre-tax money over to a traditional IRA?” What's the answer now?
Yesterday the United States Government Accountability Office (GAO) released a study on IRA balances accumulated as of 2011. The report provides some fascinating information about the number of people who have IRAs, as well as the staggering amounts that some people have accumulated in them. While there are many points that can be taken away from the study, here are three that may be of particular interest.
With college expenses at some of the best schools now exceeding $60,000 per year, education related expenses are fast becoming one of the biggest obstacles many baby boomers face when saving for their own retirement. For many families, planning for a college education goes hand in hand with IRA’s and retirement planning. Below are three ways smart IRA planning can help you pay less for college.
Can you contribute to a Roth IRA if you are already allocating salary deferrals to a Roth 401(k)? We provide the answer and look at the contribution requirements for both Traditional and Roth IRAs.
This week's Slott Report Mailbag looks at converting non-deductible funds to an IRA and the rules for taking a Roth distribution of contributed and converted funds.
