SCENARIO: John owns multiple Roth IRAs. He believes it is necessary to maintain all these accounts to keep things properly organized and to track his 5-year conversion clocks. He has contributed to Roth IRA #1 for over a decade. He did a partial Roth conversion from a traditional IRA many years ago (to Roth IRA #2).
Question:
As we did 2 years ago, will we be able to skip taking a 2022 required minimum distribution (RMD) without penalties?
Answer:
Sorry, but RMDs are in full effect for 2022. The CARES Act waived RMDs in 2020, but that was a one-time deal. RMDs were back in play for 2021, and are still required for 2022 as well.
Some of the proposed SECURE Act regulations, released in February, are convoluted and unnecessary. We have made our opinions known. Fortunately, many of the confounding new rules – several of which we have written about – will be limited in their impact. However, a new discovery could affect a larger percentage of IRA and 401(k) beneficiaries. The combination of a few basic principles may lead to inherited IRA confusion. Does order + order = chaos?
Example: Joe, age 75, has a traditional IRA (“IRA X”). Joe dies and leaves the IRA to his daughter Lucy. Lucy does NOT qualify to stretch payments as an eligible designated beneficiary (EDB) over her lifetime, so she must apply the 10-year rule. The entire IRA must be emptied by the end of the tenth year after the year of death. Additionally, Joe died after his required beginning date (“RBD” – April 1 of the year after he turned 72), so Lucy must also take required minimum distributions (RMDs) in years 1 – 9 of the 10 years.
Last week in Kansas City, the Ed Slott team hosted our first in-person training program for members of our Elite Advisor Group since late 2019. While we managed to stay in contact with everyone via virtual meetings for the last two years, it was good to again see people face-to-face. The conversations were lively and interaction among the members during the breaks was spirited.
By Andy Ives, CFP®, AIF®IRA AnalystFollow Us on Twitter: @theslottreport Question: I have a 401(k) that I’d like to use a portion...
Qualified charitable distributions (QCDs) continue to gain popularity, and with that popularity comes more questions. Here are a dozen QCD facts that will keep you on the straight-and-narrow with your QCD transactions:
Question:
I’m 68 years old. I would like to start IRA withdrawals. What are the rules for withdrawing before my RMDs are required at age 72?
Thanks,
Bob
For those who have 401(k)s or other employee retirement plans (but not SEP or SIMPLE plans), the required beginning date (RBD) for when required minimum distributions (RMDs) are to begin is the same as for IRA owners – April 1 of the year after a person turns 72. However, if the plan allows for the “still-working exception,” the RBD can potentially be delayed if a worker is still working for the company where they have the plan. (Also, the worker cannot own more than 5% of the company in the year they reach age 72.)
The deadline for filing your 2021 tax return is this Monday, April 18. It is extended through the weekend because IRS offices in Washington DC are closed on Friday, April 15, in observance of the locally recognized Emancipation Day. As such, this buys all of us a couple of extra days to complete our returns. For procrastinators, or for those who simply had time get away from them, there is still sand in the hourglass to complete certain IRA transactions.
Question:
I have a non-spousal inherited IRA account. Once I take out my RMD for the year, am I able to take out excess funds and roll those into a Roth account?
Thank you.
Answer:
Inherited IRA accounts do not follow all the same rules nor do they have all the same benefits as your own IRA. For one, inherited IRA dollars are not permitted to be converted to a Roth IRA. This is true even if you have satisfied your RMD for the year on that inherited IRA account.
