As 2021 draws to a close, many of us will naturally look back and try to make some sense of the past year. On the whole, it would be hard to classify 2021 as an “uneventful” year. But in the world of IRAs and workplace plans, it actually was – especially compared to the previous two years.
During 2021, Congress has taken up a number of different retirement proposals, and it’s been difficult to keep track of them. Here’s an update of how things stand at the moment. Of course, new developments could occur at any time, so stay tuned.
Question:
Ed,
My client recently passed away at the age of 86 and the beneficiaries were his twin grandchildren who are six years old. Does their 10-year clock to withdraw the funds start right away, or can they wait until they are 18 years old to start their 10-year clock to withdraw the funds?
On July 15 and 16, financial advisors from around the country gathered virtually for Ed Slott and Company’s Instant IRA Success workshop. We took a deep dive into the rules governing retirement accounts and engaged in some lively discussions of issues that advisors on the front line are facing regularly as they help their clients plan for a secure retirement. Here are five takeaways to share from our recent meeting:
With the passage of the SECURE Act, once common IRA beneficiary planning strategies have been upended. For example, no longer can just anyone stretch payments on an inherited IRA. You must qualify as an “eligible designated beneficiary” (EDB) to stretch using your single life expectancy.
It has been well over a year since the SECURE Act became a reality, transforming the rules for inherited IRAs and doing away with the stretch IRA for most beneficiaries. While the SECURE Act statute gave us framework for the new rules, there are large gaps that need to be filled in and many unanswered questions remain.
On May 5, the House Ways and Means Committee unanimously passed the Securing a Strong Retirement Act of 2021. According to lawmakers, the proposal is designed to pick up where the SECURE Act of 2019 left off and help increase retirement savings even more. The so-called “Son of SECURE” would make more big changes to retirement accounts. Here are some highlights:
Question:
I am 83 years old with an IRA rollover account, regular IRA account and a small Roth IRA. If I convert a portion of either the rollover or regular IRA to a Roth IRA and die before 5 years after the conversion, is there any penalty to me or the beneficiaries? Also, can I convert to the existing Roth IRA or should I start a new Roth IRA? I do not plan to make any withdrawals from any Roth IRA. Does it make a difference from which IRA I convert funds?
Thank you for your response,
George
Just a few weeks after the start of the baseball season, the IRS has thrown us a curveball by apparently interpreting the SECURE Act 10-year payout rule in a totally-unexpected way.
We say “apparently” because the IRS explanation isn’t very clear. And even if it was clear, the IRS offered the information in an informal publication that should not be relied on.
Here’s the backstory: One of the major changes made by the 2019 SECURE Act was the elimination of the stretch for many beneficiaries of inherited IRAs.
The SECURE Act made many changes to the rules for beneficiaries who inherit retirement accounts. One of the most significant ones is the end of the stretch IRA for most beneficiaries. However, there are some beneficiaries called “eligible designated beneficiaries” (EDBs) who can still use the stretch. How well do you understand this new class of beneficiaries? Take our quick quiz. The answer may surprise you.
