Top 10 IRA “Popular Confusions”
By Andy Ives, CFP®, AIF®IRA AnalystFollow Us on X: @theslottreport The Ed Slott team answers thousands of IRA and work plan questions...
Andy Ives
“Mid-Air” Roth Conversions
If ever I was traveling from Los Angeles to Atlanta, I would choose a direct flight with no layovers. I want the most efficient route to my destination. Point A to Point B. Take off, land. Assuming no difference in ticket price and all things being equal, if another LAX to ATL itinerary included a stop in, say, Chicago, would there be any reason to take it? Why pass through another airport in another city when I can fly direct?
IRA Beneficiary Payout Rules – the Madness Continues
The lunacy of IRA beneficiary payout rules continues to boggle the mind. As I guide advisors through the options available to their clients, various nuances present one unique scenario after another. Did the original IRA owner pass away before or after the establishment of the SECURE Act? How old was the person when they died? Who was the beneficiary? Is this a successor beneficiary situation? Ultimately, by following the individual fact patterns, definitive answers materialize.
The Age 50 Exception and the Still-Working Exception: Today’s Slott Report Mailbag
QUESTION:
Hello! I recently came across one of your articles and decided to reach out to you in hopes of getting some clarification re: the Secure Act 2.0 and distributions as a qualified public safety employee. In a nutshell, I am a 17-year career firefighter for a county government. With the new Secure Act 2.0, it seems as though I can take distributions after 25 years of service, OR age 50, whichever comes first, without penalty. If this is true, would I be eligible to begin taking distributions at age 47, without penalty?
3-Year Statute of Limitations – Missed RMDs
When an IRA or retirement plan owner reaches a particular age, that account owner typically must begin taking required minimum distributions (RMDs.) The RMD is calculated based on the year-end account balance divided by a life expectancy factor. Of course, there is a parade of variables to consider, including:
Anomalies and Exceptions
As already-complicated IRA rules spiral further into an abyss of confusion, it comes as no surprise that irregularities exist. Up is down and left is right. Green means stop, red means throw your hands up in exasperation.
Inherited IRAs and RMDs: Today’s Slott Report Mailbag
Question:
Greetings,
If I have the beneficiaries on my IRA listed as my wife (50%) and two children over 21 (50%), is my wife still able to move her half of the IRA into her existing IRA when I am gone? Or does having the adult children as partial beneficiaries inhibit her ability to do a spousal rollover to combine it with her existing IRA?
Roth Conversion Confusion – Taxes Withheld When Under 59 ½
There is no doubt we have written about this topic in past Slott Report entries. Possibly many times. There is also no doubt that people continue to make this same error, over and over again. Such was the case recently when the Ed Slott team visited with 150-plus financial advisors from across the nation in Boston.
Trust as IRA Beneficiary – A Potentially Catastrophic Problem
We say in our training manuals that “the SECURE Act obliterates IRA trust planning.” That’s an aggressive word – “obliterates” – but it is accurate. We also shout from the mountain top that every trust created prior to the SECURE Act and named as an IRA beneficiary must be reviewed, potentially rewritten, or scrapped altogether. What was a perfectly effective planning strategy a couple of years ago could be totally useless now. Here’s how and why…
Age 55 Exception and Inherited IRAs: Today’s Slott Report Mailbag
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,
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