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?
Question:Hello,I am involved with a traditional non-spouse inherited IRA that was passed from my mother to myself and two siblings in 2022. My mother was 84 when she passed and was taking RMDs.I understand the new legislation passed under the SECURE Act requires any such traditional inherited IRA requires full distribution by the end of the 10-year period following her death. I fully understand the law change.
Some of you are aware that there are two types of section 457(b) retirement plans – governmental plans for state and local municipal workers, and “top hat” plans for highly-paid and managerial employees of tax-exempt employers like hospitals. What you may not know is that the two types of plans are different in several important ways.
