It is early 2021 and two ingredients mix again: retirement money in motion, and required minimum distributions (RMDs). This may not appear to be a dangerous concoction, but when improperly combined, the results can be a bitter beverage.Required minimum distributions cannot be rolled over, period.
Question:I am going to turn 72 in December of 2021. When I take my RMD, what is the dollar amount I use to calculate my RMD? Is it the account value ending December 31, 2020, or December 31, 2021? Thank you for any clarification.Bob
A Simplified Employee Pension (SEP) is a popular choice for many small employers. Although these plans are in fact designed to be less complex than other types of retirement plans, there are many ways to go wrong and make errors. Here are three tips to avoid tax problems with your SEP.
The Internal Revenue Code is over 4,000 pages of often unintelligible tax jargon. So, it shouldn’t surprise anyone that the law contains more than its share of baffling and inconsistent provisions.Here are four examples pertaining to IRAs and company retirement plans:
Question:I hope you can help me with this, as I cannot find the answer anywhere or from anyone.In 2019, my client Frank, passed away. His cousin, Lisa, inherited his IRA. In 2020, Lisa passed away. Her husband, Rob, inherited the IRA. They are all the same age.
The rules for rolling over IRA distributions can be complicated at any time of the year. They are especially challenging at the end of the calendar year.Surprisingly, sometimes IRA owners have doubts as to whether a distribution taken in one calendar year can even be rolled over in the next. There is no problem with this! Nothing prevents you from taking an IRA distribution in December, 2020 and rolling it over in January, 2021, as long as you follow all the usual rollover rules that always apply.
Question:We had a client who died with no beneficiaries on his $500k 401(k). He wasn’t married and only 45 years old. His parents are disclaiming rights to the inheritance, so it’s going to his siblings. Is there any way these two siblings can stretch the retirement account into an inherited IRA? If so, what does that look like?Thanks,PatrickAnswer:Hi Patrick,The siblings may still be able to use the stretch even after the SECURE Act eliminated it for most beneficiaries.
Coronavirus-related distributions (CRDs) are no more. Millions of Americans took advantage of the opportunity to make penalty-free withdrawals from their IRAs and 401(k) plans in 2020. But unless Congress resurrects them, CRDs are no longer available.Yet the economic damage caused by the pandemic is still very much with us. So, without CRDs, where do you turn for money to pay your bills?
As we enter tax season and consider last year’s transactions, it bears repeating: Roth IRA contributions can be recharacterized, Roth conversions cannot.A Roth IRA contribution can be recharacterized (changed) to a Traditional IRA contribution. The opposite is also true. A Traditional IRA contribution can be recharacterized to a Roth contribution. This can be done for any reason. As long as the recharacterization is done by October 15th of the year after the contribution, it is a perfectly acceptable transaction in the eyes of the IRS.
Question:I recently retired and I plan to relocate to Tennessee. I would like to purchase a new home. Can I pull funds from my IRA to do so, and what would be the implications? Thank you.EdnaAnswer:Edna,If you are over 59 ½, you have full access to your IRA dollars with no strings attached – other than having to pay taxes on the distribution. If you want to withdraw some dollars to buy a new home, then go for it. However, if you are under age 59 ½, then there would be a 10% penalty on any early IRA distribution (plus taxes due) unless an exception existed.
