The rollover rules can be especially challenging at the end of the calendar year. If you took a distribution from your IRA at end of 2021 and are considering a rollover in 2022, here is what you need to know.
A person is allowed only one IRA-to-IRA or Roth-IRA-to-Roth-IRA 60-day rollover per year. This 12-month period is a full 12 months – it is not a calendar year. Accordingly, we refer to this as the “once-per-year rule.” For example, if a person received an IRA distribution in March that is subsequently rolled over, he is not eligible to initiate another 60-day IRA or Roth IRA rollover with a distribution received before the following March. The 12 months begin with the date the funds are received by the account owner. (Day of receipt is an important distinction. This could buy a person a couple of days when the 60-day deadline is approaching and a check was originally mailed to the IRA owner.)
As discussed in the October 18 Slott Report, spousal beneficiaries of IRAs can take advantage of certain payout rules that aren’t available to non-spouse beneficiaries.For example, a surviving spouse who remains a beneficiary can defer required minimum distributions (RMDs) until the year her deceased spouse would have turned age 72. Also, when RMDs begin for surviving spouse beneficiaries, the spouse can go back to the IRS Single Life Expectancy (SLE) Table each year to recalculate her life expectancy factor.
As you approach your golden years, you may be looking to simplify your life to wring the most out of retirement. It may be time to right size and move from a larger house with an abundance of maintenance to a smaller space that is easier to manage. It may also be time to declutter and organize years of belongings. Make a new start. Retirement accounts should not be overlooked as part of this process. Consolidating these accounts can go a long way towards simplifying life.
Question:Can you put funds into a Roth IRA for a 14 year old using money you have paid the child for doing chores?Client was told all he needed to do was keep a record of what was paid by to the child.I have always enjoyed your presentations.Thank you,Cathy
Question:How can the beneficiaries of an estate roll a 401(k) paid to the estate to a Roth IRA? What steps must be taken?BobAnswer:Bob,Inherited IRAs cannot be converted to inherited Roth IRAs, but inherited 401(k) plans can be converted. This is an anomaly in the rules, but it is allowed. However, if the 401(k) was already paid to the estate, those former plan dollars cannot be rolled back to a traditional IRA or converted.
The IRA and plan rollover rules have been in constant flux this year. We are now past the original July 15 extended rollover deadline. This was the first extension date created by IRS Notice 2020-23. Distributions from an IRA or company plan taken February 1 or later could have been rolled back to an IRA or company plan beyond the standard 60-day rollover window. This rule applied to any distributions that were otherwise eligible to be rolled over, including unwanted RMDs.
Question:Hello,I am aware of the IRA one-rollover-per-year rule. What I can’t find is if a married couple that files jointly violates the rule if they each do a rollover from their own individual IRAs?For example: One person has an IRA in their name and takes a distribution and rolls it over within the 60-day limit avoiding the taxable distribution. Now, can the other spouse also take a distribution from their own IRA and do the same without incurring a taxable distribution?Thanks so much.Maggie
Question:According to the IRS website: Beginning in 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own (Announcement 2014-15 and Announcement 2014-32). The limit will apply by aggregating all of an individual’s IRAs. Trustee-to-trustee transfers between IRAs are not limited. Rollovers from traditional to Roth IRAs ("conversions") are not limited.If I am reading this correctly, we can "roll over" (hand carry checks) for multiple IRA accounts, as long as we are rolling over funds to a Roth IRA. Is that correct?Thank you,ShirleyAnswer:Hi Shirley,The once-per-year rollover rule causes a lot of confusion. You can only do one 60-day rollover between IRAs of the same type in a 365-day period. This rule applies to your traditional and Roth IRAs in the aggregate.
Question:I am still working at age 71 and don't really need the required minimum distributions (RMDs) from my rollover IRA. The IRA was funded largely with distributions from a tax-qualified pension plan and a tax-qualified 401(k) plan. Some deductible contributions were made many years ago as well. I would like to transfer some of the IRA into my current employer's 401(k) so as to reduce RMDs until I terminate my employment with my current employer. I am not a 5% owner of the company, so I don't currently have to take RMDs from the 401(k).
