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.
Roth 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.
Inherited IRAs and Roth Conversions: Today’s Slott Report Mailbag
Question:I inherited an IRA in 2022 upon the passing of my father after he had already started his RMDs. I took a 2023 RMD from it in May 2023. Your website says I’m not required to take this RMD. I called the custodian to reverse it, but they said it can’t be done. Is this true?
Help a Young Person Use Summer Earnings to Start a Roth IRA
Is your child or grandchild working hard this summer? A summer job can be a valuable experience for a young person. Whether it is making smoothies, serving tables, or being a camp counselor, a summer job can teach life skills and give a first opportunity to manage finances
Backdoor Roth IRAs and Beneficiary RMDs: Today’s Slott Report Mailbag
Question:Hi,I have a question regarding solo 401(k)s. Does a solo 401(k) contribution affect the pro-rata rule when considering a backdoor Roth IRA?Best,James
5 Ways Excess IRA Contributions Happen
You can have too much of a good thing. While it is a good strategy to contribute to an IRA, some contributions are not allowed. When a contribution is not permitted in an IRA, it is an excess contribution and needs to be fixed. Some excess contributions are pretty easy to understand. Others are a little more complicated. Here are 5 ways an excess IRA contribution can happen:
Summertime Similes & Metaphors – No Shirts or Shoes Required
Oftentimes with these articles, I compare certain retirement account rules to arbitrary items. A creative metaphor or simile can help the reader grasp a concept. For instance, past entries have referenced revolving doors, hurricane preparedness, Bloody Mary cocktails, Charlie Brown’s Halloween costume, genies in lamps and even Indiana Jones. But I was struggling. No single comparison seemed to carry the weight necessary to create an entire Slott Report submission. So, here is a 6-pack of random summertime similes and other retirement account comparisons.
If the IRS Ask Questions, Can Your Actions Be Justified?
A couple of years ago I was asked what the tax consequences are when a Roth IRA is split in divorce. After a pause, I answered honestly: “I have no idea…but will find out.” In fact, there is no specific guidance in the Tax Code or in the regulations on how to handle such a transaction.
A Better Way of Understanding the Once-Per-Year Rollover Rule
The “once-per-year” rollover rule is one of those IRA rules that has serious tax consequences and cannot be fixed if violated. Breaking the rule results in a taxable distribution and a 10% early distribution penalty if you’re under age 59 ½. Plus, any rolled over funds are considered excess IRA contributions that are subject to a 6% annual penalty unless timely corrected.
Inherited Roth IRA: RMDs or No?
QUESTION: Do required minimum distributions (RMDs) apply to inherited Roth IRAs?ANSWER: It depends on who the beneficiary is.Owners of traditional IRAs must start taking RMDs when they reach their required beginning date (RBD). That date is generally April 1 of the year after a person turns 73 (or 72 prior to SECURE 2.0, or 70 ½ prior to the original SECURE Act).
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