Year-end to-do lists are commonplace. The problem is, they always seem to get published in mid-to-late December. I can almost hear the collective “thanks for nothing” comment from readers as the information arrives too late to act upon. As we are still before Thanksgiving, here are a few year-end items to consider…before it really is too late.
Question:My client’s husband recently passed away. We have converted her late husband’s 401(k) to a beneficiary 401(k) in preparation for transferring it to a beneficiary (inherited) IRA. There is company stock inside the 401(k) currently. We want to leverage the NUA (net unrealized appreciation) tax strategy. Is stock inside a beneficiary 401(k) eligible for NUA, the same as the stock would have been when he was alive?All the best,
Question:My client’s husband recently passed away. We have converted her late husband’s 401(k) to a beneficiary 401(k) in preparation for transferring it to a beneficiary (inherited) IRA. There is company stock inside the 401(k) currently. We want to leverage the NUA (net unrealized appreciation) tax strategy. Is stock inside a beneficiary 401(k) eligible for NUA, the same as the stock would have been when he was alive?All the best,
Question:Dear Mr. Slott,I made $40,000 additional non-deductible (after taxes) contributions to my IRA many years ago. I have filed IRS Form 8606 every year informing the IRS of the contributions. I would like to withdraw the $40,000 this year so that when I have to take my RMDs next year, the reporting to the IRS will be simpler.
Within the 400-page Ed Slott advisor training manual, we include a basic chart that outlines the Roth IRA distribution ordering rules and the availability of those specific dollars. When presenting the material to a live audience, I always say it is my favorite page.
QUESTION:On September 6th in a piece titled, “Rules for Inherited IRAs that May Surprise Nonspouse Beneficiaries,” Sarah Brenner from Ed Slott and Company wrote, “If you inherited the IRA funds in 2020 or later, as a nonspouse beneficiary you will most likely be subject to a 10-year payout-period, possibly with annual RMDs during the 10-year period.”My brothers and sisters and I are non-spousal beneficiaries, and my understanding is that there is no rule or code yet that states we must take some out of the inherited IRA account each year, only that it must be drained by end of the tenth year as required by the SECURE Act. My sibling says we must take some each year. Which of us is correct? We are all under the RMD age, in our sixties and our parents passed September of 2022.
The August 28, 2023 Slott Report summarized IRS Notice 2023-62, where the IRS delayed the effective date of the SECURE 2.0 rule requiring catch-up contributions by higher-paid older employees to be made on a Roth basis.
Question:Hello,If you do a Roth conversion from an IRA, does that qualify as your required minimum distribution (RMD) for the year? Or is it separate and apart from the RMD?Thank you,
Last Friday afternoon (August 25, 2023), the IRS gave employer plans two more years to comply with the controversial SECURE 2.0 rule requiring “catch-up contributions” for high-paid employees to be made on a Roth basis. The effective date of the rule was postponed from January 1, 2024 to January 1, 2026. The delay is set forth in IRS Notice 2023-62.
We are often asked how the Roth IRA 5-year rule works. This is a borderline trick question because there is not one 5-year rule for Roth IRA distributions. There are actually two different 5-year rules. So, to avoid confusion, let’s talk separately about each 5-year rule.
