Question:
Can a retired person not working contribute to a Roth IRA?
Answer:
There are no age limits for Roth IRA contributions. This allows older people to contribute. However, the rules do require earned income. For example, income from a part time job would work.
We at the Slott Report would like to wish all our readers a happy and safe holiday season. 2020 has been a year like no other. Thank you for taking your valuable time to read the Slott Report during this challenging period.
The end of the year is always a time to look back. 2020 has been a busy year at the Slott Report. In January, the SECURE Act became effective and changed the retirement account landscape.
The end of 2020 is almost here. With the end of the year come certain retirement account deadlines. Here are 5 items you should have on your 2020 year-end retirement plan to-do list:
1. Do a 2020 conversion
If you are considering converting an IRA to a Roth IRA in 2020, time is quickly running out. The deadline for 2020 conversion is the end of the calendar year. There is a common misconception that a conversion can be done up until your tax-filing deadline.
Question:
I am 79 and still employed. My employer has an SEP for me and I have a Rollover IRA from a previous employer. Can I transfer my Rollover IRA to the SEP account?
Thank you,
George
Answer:
Hi George,
There are no restrictions in the tax law against combining a SEP IRA and traditional IRA that contains funds rolled over from an employer plan.
The clock is ticking if you are considering converting your Traditional IRA to a Roth IRA in 2020. More IRA owners are making this move this year as historically low tax rates and COVID-related income losses have combined to make this an ideal time to trade off the tax hit of a conversion for the promise of future tax-free Roth IRA earnings.
The IRS has recently added a new reason for self-certification of late rollovers to its list. Revenue Procedure 2020-46 modifies the list of reasons to include an IRA or company plan distribution made to a state unclaimed property fund and later claimed by an IRA owner or plan participant. Rev. Proc. 2020-46 is effective as of October 16.
Question:
Is there any problem with someone who is self-employed and has an active SEP making a deductible SEP contribution and an IRA QCD after age 70 1/2? In this case, the QCD would come from the IRA while the SEP continues to be funded. Does any offset apply?
Bill
Answer:
Hi Bill,
This is an interesting question!
Both Roth 401(k)s and Roth IRAs offer the ability to make after-tax contributions now in exchange for tax-free earnings down the road if the rules are followed. However, there are some important differences between the two retirement accounts that you will want to understand.
1. Contributions limits are higher for Roth 401(k)s
One major difference is in the amount that you may contribute. Your Roth IRA contribution is limited to a maximum of $6,000 for 2020 if you are under age 50.
The year 2020 has been a challenging one. With coronavirus cases rising in most of the country and economic relief stalled in Congress, many individuals may be looking to find funds to pay urgent bills. One possibility is a coronavirus-related distribution (CRD). While the first phase of the pandemic may be gone, the economic turmoil is still with us and so are CRDs. CRDs are still available through December 30, 2020. These are distributions, up to $100,000, from a company plan or IRA made anytime during 2020 (through December 30) to affected individuals.
Question:
Hello,
If an individual has a solo 401(k), is this considered a "retirement plan at work" that would limit the deductibility of IRA contributions?
Thanks!
Susan
Answer:
Hi Susan,
Being an active participant in a retirement plan for the year can limit your ability to deduct your traditional IRA contribution, depending on your income. Participating in a solo 401(k) would count as active participation for this purpose.
