Question:
I recently retired and I plan to relocate to Tennessee. I would like to purchase a new home. Can I pull funds from my IRA to do so, and what would be the implications? Thank you.
Edna
Answer:
Edna,
If you are over 59 ½, you have full access to your IRA dollars with no strings attached – other than having to pay taxes on the distribution. If you want to withdraw some dollars to buy a new home, then go for it. However, if you are under age 59 ½, then there would be a 10% penalty on any early IRA distribution (plus taxes due) unless an exception existed.
We are just a few days into the new year, and many people are anxious to get their full IRA contributions in for 2021. However, a common question is, “It’s only the first week of the year and I haven’t received a paycheck yet. Can I still make my contribution now, or do I need to wait until I actually have earned income?”
Ah, the end of the year. Snow is drifting, music plays quietly in the background. Ma in her kerchief, Papa in his cap, just settling down for a long winter’s nap…
Nope. No time for that. ‘Tis the season of BUSY, BUSY, BUSY!
Did you write a check to a charity from your checkbook IRA in hopes that it would be a qualified charitable distribution (QCD) for 2020? If so, you better make sure the charity in fact CASHES the check before the end of the year.
Question:
Recently, I received two checks, one for all assets in a Traditional IRA and one for all assets in a Roth. Mindful of the 60-day rollover rules, I endorsed one of them to my brokerage company to complete an IRA-to-IRA transfer. When attempting to do the same with the Roth funds, I was told that this would create another rollover and run afoul of the IRS "one-every-12-months" requirement.
Bob is 40 years old. He is a single tax filer, participates in a 401(k) at work, and makes a healthy annual salary of $160,000.
Bob has consistently contributed $5,000 each year to his Traditional IRA for 5 years ($25,000 total). However, Bob could not deduct any of the contributions because he has always been over the phase-out range for tax filers covered by a company retirement plan.
Recently we became aware of a multi-layered tax strategy that we think is a bridge too far when it comes to Coronavirus-related distributions (CRDs). In fact, it may even be outright tax fraud.
As most readers are aware, the CARES Act created CRDs which waive the 10% early distribution penalty on up to $100,000 of 2020 distributions from IRAs and company plans. The tax would still be due, but could be spread evenly over three years.
Question:
My father passed away in 2019 and left me an IRA. Will the SECURE Act apply, or will it be grandfathered under the pre-2020 rules?
Thank you.
Aram
We have collectively crawled into the hollow of a 2020 tree and found ourselves in the Upside Down. (That is a “Stranger Things” reference, for the uninitiated.) The SECURE Act turned beneficiary options upside down. The CARES Act turned required minimum distribution rules upside down.
With Veterans Day being just last week, an overview of two military retirement benefits felt like an all-important and appropriate topic of discussion. One benefit pertains to a penalty exception for accessing retirement dollars prior to the age of 59 ½. The other relates to the treatment of military benefits when a soldier has made the ultimate sacrifice.
Active Reservists’ Exception
The Pension Protection Act of 2006 created the Active Reservists’ Exception. This penalty exception allows active reservists to avoid the 10% penalty if they withdraw funds from either their IRA or workplace retirement plan before reaching the age of 59 ½.
Great work you all do. Been a reader of Ed for a long time. How would this scenario work? New client of mine's husband passed away in 2019 and he had not taken his RMD. The plan was to transfer the account to my firm and take the RMD when it got to my firm as there was plenty of time. However, the insurance company kept rejecting the transfer paperwork (as they did not tell the client everything they needed to submit).
