Year-End IRA and Retirement Planning Questions Answered

By Joe Cicchinelli, IRA Technical Expert

Follow Me on Twitter: @JoeCiccEdSlott

2014 is almost here, but we wanted to open the Slott Report Mailbag one last time to answer some pressing year-end retirement planning questions, as well as several issues with decisions that will come in the new year. We at Ed Slott and Company want to wish you a Happy New Year and invite you to join us in 2014, as we continue to educated financial professionals and consumers on IRA intricacies as well as tax and retirement planning strategies and updates.


My wife and I have just one grandchild from one of our two sons (with no current plans for a 2nd). The other son and wife are trying but no luck yet. After our passing, we would like our IRA and Roth IRA to be shared by all grandchildren, likely equally. How can we accomplish this?

You could name your “living grandchildren” as beneficiary at the time of your death but many financial institutions might not accept that vague beneficiary designation without your grandchildren’s specific names. You may need to consider naming a trust for your grandchildren as beneficiary of your IRAs. Minor grandchildren cannot sign the necessary paperwork to open an inherited IRA, cannot manage the investments, and cannot request the required minimum distributions. You should consult with a financial advisor on the best way for this type of asset to pass to a minor.


If an IRA to Roth IRA conversion is done on December 30, 2013 can it be recharacterized on January 30, 2014 to avoid liability on the conversion? Can it legally be converted again in 2014 to avoid MAGI (modified adjusted gross income) limits? If the conversion and recharacterization are done before April 15, 2014, how do I show this maneuver when I file my tax return?

A 2013 conversion can be recharacterized (reversed) up to October 15, 2014. If it’s recharacterized in 2014, that 2013 conversion cannot be reconverted until more than 30 days after the recharacterization. Follow the instructions on IRS Form 1040 and Form 8606 on how to show that on your tax return. You might want to consider having your taxes done by a professional for that tax year.


Hello Ed and thank you for taking the time to read my question. I have been checking out information on the web with regard to tax implications when withdrawing from a Roth IRA and cannot find the exact answer I want. I am over 60.

I opened a Roth IRA recently and will be making periodic conversions, over time, from my Traditional IRA. I understand that after the Roth IRA is opened for at least five years, any capital gains become tax free along with the principle.

Does the five-year starting date begin when I initially open the Roth IRA despite the fact that I will be doing partial conversions for a number of years to follow?

Please advise and thank you again,

In your case, because you’re over age 59 ½, there is no 5 year clock with respect to the 10% early distribution penalty on conversion funds being withdrawn within 5 years. However, for purposes of the earnings (there are no capital gains in an IRA) in the Roth IRA you must wait for more than 5 years before those funds can be withdrawn tax-free. Earnings are withdrawn last; withdrawals will be deemed to be made from your conversions first on a first in, first out basis.


If I have a 401(k) and a traditional IRA at the end of 2013 and then in 2014 roll the 401(k) into a traditional IRA, what happens to the RMD (required minimum distribution) for the 401(k) since it no longer exists? Do I have to take it BEFORE rolling the 401(k) into an IRA?


The 401(k) RMD must be taken before you roll over the remaining 401(k) funds to the IRA.



My sister, Ann, age 66, died and left her IRA to her only two sisters, Mary, 69, and Susan, 71. The accounts were separated on time and each sister is in charge of her own inherited IRA. The older sister, Susan, names her younger sister Mary, age 69, as beneficiary of her own inherited IRA. Susan starts taking her RMDs, but dies at age 73 leaving her inherited IRA to the only remaining sister, Mary, now age 71. Can the surviving sister, Mary, who is beneficiary of this account, retitle the account and continue to take RMDs based on the older sister’s age and applicable divisor? If so, how should this inherited IRA be named?

Keep in mind that this only remaining sister would then be taking two RMDs from the original owner’s account. One based on her age and applicable divisor and one based on her sister, Susan’s age at death and applicable divisor.(i.e., Ann as original owner’s sister Mary as beneficiary or Susan as first beneficiary w/ second sister (Mary) as beneficiary.) I understand why this is so confusing, but really need your advice. Thank you.


When Mary inherits from Susan, Mary is a successor beneficiary. She is inheriting from a beneficiary and not from the IRA account owner. The required distributions cannot be reset to the successor beneficiary’s age. They must continue based on the original beneficiary’s calculation. Example: Susan is age 40 when she takes her first required distribution. She is using a factor of 43.6. Each year that factor is reduced by 1. When Mary inherits from Susan, she continues using that schedule.


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