The Slott Report

There is a little known provision in the tax code that can provide a huge income tax advantage in the right circumstances. We explain this provision and how it may affect you below.

One of the most effective ways to accumulate a large retirement nest egg is to start young. And no age is too young. In fact, the younger the better. Even a one year-old can make an IRA, or better yet, a Roth IRA, contribution as long as they have earned income – perhaps as a model in a Gerber Baby Food commercial. In reality though, most people don’t start contributing to retirement accounts until much later on in life.

Last week I said that some taxpayers may be forced to take funds from their Roth IRA to pay the income tax due on a Roth IRA conversion. Yes, you can take money out of your Roth IRA. Generally there is no income tax due on a distribution, but if you are under age 59 ½ you may owe the 10% early distribution penalty. Here’s the way it works.

IRAs are different, complicated, but in the end, a great avenue for retirement planning. In this week's Slott Report Mailbag, we answer questions on required minimum distribution rules (RMDs), IRA contribution limits and how to take withdrawals if you are a non-designated beneficiary.

We have discussed the importance of an IRA beneficiary form at length. You should always know where a copy is for yourself and make sure your financial advisory team has a copy on hand as well. Also, you must make sure the beneficiary form is current to reflect your financial wishes (who is getting what).

Individuals who did Roth conversions in 2010 and took advantage of the opportunity to spread the income over 2011 and 2012 are now faced with the tax bill for income that must be included on their 2011 tax returns. Many are now having second thoughts or are having difficulty coming up with the funds to pay the tax.

This week's Slott Report Mailbag includes questions about converting an employer-based 401(k) to a Roth IRA, the use of trusteed IRAs and what to do if you want to make an IRA contribution from money you earned at the end of 2011, but didn't receive until 2012.

Thanks to April 15th falling on a Sunday and a Washington D.C. holiday (Emancipation Day) on the following day, the April 15th filing deadline is pushed back to April 17, 2012 for 2011 federal income tax returns. Below are five things you should address between now and then.

This is the final part of a two-part article examining six options individuals have for their retirement plan benefits when they leave an employer or become their own boss. In the first part, we covered three options (rolling over to a Traditional IRA, taking a lump sum distribution, leaving it in the plan). We finish our guide with the last three options and provide some closing words of wisdom when considering which choice is best for you.

The "sandwich" generation is those who are raising their children and also taking care of their parents. They are sandwiched by their care-taking responsibilities. They are likely to have their own 401(k)s or other employer plans and IRAs, and they are likely to be the beneficiaries of their parent’s retirement assets. Again, they are sandwiched – they are owners with beneficiaries and they are also beneficiaries. Here is what these caretakers need to know about both sides of the equation.