Higher education expenses can be steep. Fortunately for those under the age of 59 ½ who need to dip into retirement savings to cover these costs, there is an exception to the 10% early withdrawal penalty. Before tapping your IRA, be sure to understand the fundamentals of this penalty exception. Here are the basics:
Spring break. Warm breezes and ocean waves and fancy cocktails are top of mind. The aroma of coconut suntan lotion entwined with barbecue smoke floats on salty air. And when morning light flickers through the palm fronds, like Jimmy Buffett said, “I sure could use a Bloody Mary, so I stumbled over to Louie’s Backyard.”
People on TikTok create investment advice videos? And I’m supposed to trust whatever this talking head is telling me? No chance. Of course, the person on TikTok could hold a number of higher education degrees and financial certifications, but until I know for sure who they are, what they are talking about, and what their objective is, I will keep my distance.
Question:
Can an Education Savings Account (ESA) be rolled into a Roth IRA under the recently enacted SECURE 2.0? 529 plans clearly can - beginning in 2024 - but I have found no reference to ESAs. Can you kindly clarify this and direct me to any literature?
Thank you,
Last week the Ed Slott team hosted another highly successful and sold-out 2-day advisor training program at Caesar’s Palace in Las Vegas. Over 250 financial professionals from across the country attended, and we plowed through our 400-page manual. During the two day event we discussed IRA beneficiary rules, trusts as beneficiary, net unrealized appreciation, backdoor Roth IRAs, SECURE 2.0 changes, QCDs, the pro-rata rule, gifting strategies, etc.
By now, most are aware the SECURE Act created a new class of beneficiaries called “eligible designated beneficiaries” (EDBs). This group includes surviving spouses, minor children of the account owner (until age 21), disabled individuals, chronically ill individuals, and people who are not more than 10 years younger than the IRA owner. (Those older than the IRA owner also qualify.)
QUESTION:
I just inherited my spouse’s inherited IRA (he got it from his father). He (my husband) was already taking required minimum distributions (RMDs) based on his own single life expectancy. My question is, do I have to empty that account in 10 years based on the SECURE Act? (I think this is correct, but if I don't have to do it, I don't want to!)
When IRA or retirement plan assets are withdrawn prior to age 59 ½, an early distribution penalty of 10% applies - in addition to any taxes owed on the distribution. However, there are exceptions in some cases, including the age 50 exception. While SECURE 2.0 expands this 10% penalty exception for public safety workers, the new law also creates a question.
A ton of questions on this topic have come across our desks, and we have seen swirling, hypnotizing spirals in the eyes of many an advisor. I can only imagine what the general public is thinking about the changes to the required minimum distribution (RMD) age. Since 1986, the RMD age was planted at 70 ½. In the past three years it has increased to 72, to 73, and will eventually jump to 75.
Question:
Hello Ed,
I have a question concerning Secure 2.0 pertaining to transferring “leftover” 529 plan account balances into a Roth IRA, beginning 2024. If I have no income in 2024, can I still transfer/contribute leftover 529 plan funds into a Roth IRA? Thank you!
Mark
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