• Question:  Is this a question you can help me with? Client’s husband & Wife had a living trust. Attorney suggested that all holdings be put into the trust or make the Trust the beneficiary. Husband died several years ago, in January, 2018 the wife died. There are two beneficiaries, brother & sister. Brother in New York state sister lives in Toledo, Ohio as did mom. We recently paid [...]

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    A lot has changed in the last six months for certain federally declared disaster areas. The Bipartisan Budget Act of 2018 added relief for the California wildfires and mudslides of late 2017. The Disaster Tax Relief and Airport and Airway Extension Act of 2017 included relief for the victims of Hurricanes Harvey, Irma and Maria. The Tax Cuts and Jobs Act of 2017 granted retroactive relief to all [...]

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    Did you know your IRA could be escheated to the state as abandoned property? Not many IRA owners are aware of this possibility, but more and more are facing it. Escheatment - Bigger and Badder than Ever The legal theory of escheatment dates way back. It originally comes from old English common law. When a person with no heirs died, their property would revert back to the King. The goal was [...]

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    Question: Hello, I am retired and have done a Roth in plan rollover within my work 401K. Am I able to do a Roth rollover within a Fidelity IRA to a Fidelity Roth IRA? Is there a rule that limits the number of Roth IRA Rollovers you can do in a year or period of time? Thanks, Dennis Answer:  There is no limit on the number of Roth conversions that can be done in one tax [...]

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    Most people know that, generally speaking, you cannot access traditional IRA money penalty-free until you reach age 59 ½. Early distributions are subject to a 10% early withdrawal penalty. Of course, like virtually every other retirement rule ever written, there are exceptions to this general rule. One of those exceptions is called the Series of Substantially Equal Periodic Payments (“SEPPs”)[...]

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    Suppose you unexpectedly incur a major liability, from a lawsuit or some other unforeseen cause. Will the funds in your IRA be protected from your creditors? Maybe ... or maybe not. Here are the rules: Federal Law Protection If you own an IRA that you've funded yourself with annual IRA contributions, then its complete value very likely will be protected from creditor claims if you are forced[...]

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    Question: I wondered if it’s possible to convert my traditional IRA to a Roth for 2017 and prior years, and then file an amended return? At least I could offset the higher taxes paid going forward, knowing I will have a tax-free Roth? Thanks very much for your help and thanks for all the provocative, timely advice. Sean   Answer: Hi Sean, When it comes to Roth IRA [...]

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    There is a lot of paperwork involved when you open an IRA account. You have to prove to the bank who you are and that your funds are legitimate. There is an account opening form and a beneficiary form to be completed. After you do all of that, then you get a multi-page, tiny print document, which is the IRA agreement. It does not require a signature, yet it is the contract between you and the IRA [...]

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    Question: Ed, great article on reasons for taking RMDs early in the year, but here's the other side of the argument, at least for me (which is why I am responding via email rather than online). My wife and I are both retired.  We have a pension, social security and then comparatively large RMDs.  We have no withholding and do not file quarterly estimated taxes.  Rather, we have all our [...]

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    Using Deferred Income to Fund Your Startup Business Could ROB Your Future One of the most difficult aspects of starting a business is obtaining proper funding. While banks have begun lending again, loans for startup businesses are still difficult to obtain. They require credit checks and substantial collateral, such as a home or other personal assets. That’s what makes using deferred [...]

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    Having just one IRA instead of several may simplify paperwork and minimize fees. But when you begin to think about leaving IRA funds to heirs, consider using more than one IRA to do so. Here are reasons why:   Preserve Funds for Bequests in a Roth IRA Statistics show that the great majority of IRA funds reside in traditional IRAs. However, traditional IRAs must make annual required [...]

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    Question: Dear Mr. Slott, In 2013, my husband was offered a buyout from his employer, Ford Motor Co.  He had been retired since 1999 and so was already receiving a monthly pension check. (My husband had been diagnosed with Alzheimer's Disease in 2011 and then passed away last November 2017.) In 2013, knowing that his life expectancy was shortened by the disease and still being able to [...]

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    It now appears that the new fiduciary rules proposed by the Department of Labor (DOL) back in June of 2016 are all but dead. Late last week, the Fifth Circuit Court of Appeals rejected a last-minute appeal of its March 15th decision to toss the DOL rules. The appeal was filed by the AARP and three states (New York, California, and Oregon), not the DOL. The original March decision was something[...]

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    Let's say you wish to contribute to an IRA in 2018, but have too much income to make a either a deductible contribution to a traditional IRA or a contribution to a Roth IRA. You still have the option to make a nondeductible contribution to a traditional IRA. Might this make sense for you?   Opportunities There are two basic, but quite different, reasons to make nondeductible [...]

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    Question: I want to leave my IRA accounts (money) to various charities. Should the beneficiary of these accounts be “my estate”? Jean   Answer: Hi Jean, It is wonderful that you are charitably inclined. Instead of naming your estate as the beneficiary of your IRA, you may want to name the charities directly as your IRA beneficiaries on the beneficiary designation [...]

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    If you have a Health Savings Account (HSA) with family coverage, determining your 2018 contribution limit has been an adventure. This in one of the many unintended consequences of the Tax Cuts and Jobs Act (TCJA). Many of the HSA limits are indexed annually for inflation. Back in May of 2017, the new numbers for 2018 were released. At that time, it was announced that the 2018 HSA [...]

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    Question: Can you please advise regarding the following: I’m 63 years old and am required to take a yearly RMD [required minimum distribution] from my deceased Mom’s IRA (BDA).  In order to save on taxes, am I allowed to have my financial institution send the RMD directly to a charity even though I’m not 70 ½ yet ? Also, when I’m retired and not able to itemize, is there any way[...]

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    Beware of making these 3 mistakes with your IRA... 1. Late Investments  If, like so many people, you made your IRA contribution for 2017 only recently in 2018, just before the 2017 tax return filing deadline, you missed earning up to 15 months of pre-tax investment returns on your contribution. Don’t repeat that mistake. Make your IRA contribution for 2018 now. This will provide an[...]

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    With the tax deadline having just passed, now is the perfect opportunity to start planning for next year. Last year’s return should be readily available, and you may even have many important items committed to memory. Additionally, four months into the year is the perfect time to begin making current year projections. Of course, this year is different. That’s because 2018 will be the first we [...]

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    Question: I was curious if a Roth conversion of post-tax money from an IRA is subject to the pro rata rules if the IRA owner also owns a SIMPLE IRA?  Is the SIMPLE excluded from the calculation? Thanks Joseph Answer: Joseph: The pro-rata rule looks at the balance of ALL your IRAs to determine which portion of a Roth conversion is pre-tax and post-tax. This includes any SEP or [...]

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    One of the greatest benefits of an IRA is its ability to provide tax-favored wealth for heirs. An IRA left to a beneficiary can be "stretched" to provide pre-tax compound investment returns for the rest of the beneficiary's life -- or even longer.  And these can be distributed totally tax free if it is a Roth IRA. How much can such a stretch IRA be worth in actual dollars?  Compound [...]

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    Question: Dear Mr. Slott, I am writing because I have what may be an unusual IRA reporting situation and would like advice, or if you will, a judgement as to how I may handle the reporting for 2017.  This particular situation is one I have not heard of or seen discussed in any article or seminar in over 20 years. Briefly, I have yet to make withdrawals from my IRAs, but in 2017, I [...]

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    One of the benefits of a Roth IRA is that contributions can always be distributed out of the Roth IRA with no tax, and no early distribution penalty for those that are under age 59½. But, you have to be able to prove to IRS that you are taking a distribution of contributions only. Under the distribution ordering rules, all Roth IRAs are treated as one Roth account, contributions are deemed to be [...]

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    With the 2017 tax filing date quickly approaching, many taxpayers are looking to take advantage of IRA contributions to lower taxable income prior to filing. However, before making that contribution, you want to be sure that you meet all the eligibility rules. The 2017 income eligibility limits for deductible contributions can be found at the [...]

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    Question: Thank you for your very interesting monthly articles.  I have the following Roth-related earned income question: Have any clever retirees and/or tax advisors figured out exactly how to justify claiming that either “conventional” pension payments or RMD distributions can be treated as “earned income” for Roth IRA purposes?  One possible justification is that the funds [...]

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    A QCD is a qualified charitable distribution. It is a way to transfer funds from your IRA to a qualifying charity as a non-taxable distribution. It can also satisfy your RMD (required minimum distribution) for the year. You must be at least age 70½ at the time of the transaction to qualify. The IRA custodian does not do any special tax reporting of your QCD. They simply report the total [...]

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    For many Americans, their IRA is their largest asset. It is not surprising then that in times of financial trouble they may want to turn to their IRA as quick source of cash. If this is your situation and you are thinking about using your IRA for a short-term loan, here is what you need to know. Some employer plans include provisions where participants can take loans, but IRAs are different. [...]

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    Question: Dear Mr. Slott, I have been receiving your e-mails for a number of years and have read your comments in The Wall Street Journallong before that - and have always found them of value. I have two questions I am hoping you can help me with that I believe have not been asked and/or addressed yet. I am in the "sweet spot" as you call it. I have a large Traditional IRA at a bank [...]

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    Tax return information is confidential. As the April 17th tax filing date approaches, pay attention to keeping your tax return information out of the hands of those who could cause you harm. Protecting Information on Your Tax Return Your tax return is full of private facts about you and your family. It includes names, Social Security numbers, income, investments, family relationships, [...]

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    One of the many issues facing self-employed individuals is how to save for retirement. Of course, one option is to open a traditional or Roth IRA. However, the annual maximum contribution is low in terms of retirement planning. In 2018, it $5,500 if you are under age 50 or $6,500 if you are age 50 and over. Therefore, the self-employed often look to adopt employer sponsored retirement plans. [...]

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    Question: Dear Sir, Greetings and wish you well. I heard about your helpfulness and appreciate if you can kindly advise me the following: We (mother and daughter) have an S corp and set up solo 401(k)s.  I made an error in profit contribution.  Unfortunately, I contributed more than allowed into a solo 401(k) in regards to the profit sharing contribution because of my misunderstanding [...]

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    Spousal IRAs are designed to allow a working spouse to make IRA contributions for a spouse who does not have enough earned income to make their own IRA contributions. There are some key requirements that must be met: The spouses must be legally married and file a joint federal tax return. This includes same-sex couples. The spouse receiving the contribution must have less [...]

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    If you have an IRA, you need to know about the “sweet spot.” What is the IRA sweet spot? Well, that is when you are between ages 59½ and 70½. Your Sweet Spot What makes this spot sweet? This is the time when you have the most flexibility with your IRA. When you reach age 59½, the 10% early distribution penalty becomes history. You can take distributions from your IRA for any reason [...]

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    Question: Dear Mr. Slott, I found your excellent article in Financial Planning concerning excess IRA contributions discovered after the filing deadline. I was hoping you could clarify one point: Your article states that the IRS does not require the withdrawal of the net income accrued. However, it was not clear in the article whether the 6% penalty applies to the net income accrued or [...]

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    The IRS website provides a host of free resources that can help minimize your tax bill and manage your taxes all year round. Yet, most taxpayers are unaware of them. Here are a dozen of the best. Reach them by clicking on the links below (every heading or blue-colored word is a link) or entering them in the search box at IRS.gov. 1. IRS Audit Technique Guides These are the same guides [...]

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    The pro-rata rule is an important, though commonly misunderstood, rule that affects the taxation of IRA money. It only comes into play when your traditional IRA consists of both pre-tax and after-tax monies. These after-tax dollars can come from non-deductible IRA contributions or rollovers of after-tax funds from employer plans. Either way, once those monies are in the account, subsequent [...]

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    Question: Husband died in 2015 at age 85.  Later that year, the surviving spouse (sole beneficiary) did trustee-to-trustee transfer to her Roth IRA.  She did not have a Roth IRA prior to that. Wife, age 90, took distributions in 2016 and 2017.  Are those qualified?  Are they subject to tax and/or penalty? Thank you, Erin Answer: Erin, It is very unlikely that the wife will[...]

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    NOTE: This article is not based on a complete review of all the inflation adjusted numbers. The Tax Cuts and Jobs Act revised the way inflation adjusted numbers will be calculated by IRS. The Act now mandates that these numbers be calculated using chained CPI. IRS has gone back and recalculated inflation adjusted amounts for use in 2018. Earlier, IRS had announced that there would be no [...]

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    Do you think you understand all the rules that govern your Roth IRA? Not so fast! There are many misconceptions as to how these complicated accounts work. Here are 5 Roth IRA facts that might surprise you: 1. You are never too old to contribute. If you have earned income and your modified adjusted gross income is below a certain level, you can contribute to a Roth IRA. Your age does not [...]

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    Question: The business is a sole proprietor operation with no employees other than the owner.  The owner is 71 and is still working.  Are contributions into this SEP allowable after the age of 70 1/2? Thank you, Lee Answer: Yes, the business owner can continue making contributions to the SEP after reaching age 70½. However, be aware that the owner must also begin taking [...]

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    Bitcoin is receiving a surge of publicity as a possible IRA investment, and a number of new firms have recently started targeting the "Bitcoin IRA" market. Here are six things to know about investing IRA funds in bitcoin:   1)  There is no such thing as a "Bitcoin IRA." Although the term is often seen in the media and advertising, there is no such thing any more than there are "stock market [...]

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    Question: Hello, I have a client who turns 71 this year and is still working and contributing to a Roth 401(k) through her company. My client plans to cut back to part-time next year, and as a part-timer, she will no longer be allowed to contribute to the plan. Does she have to begin taking required minimum distributions once she stops contributing or once she retires? Best, Doug[...]

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    There are certain events that will require the filing of special forms or tax documents when you file your income tax return. If you have received a distribution from any retirement account, real or deemed, during the year, or if you have done a Roth IRA conversion - even if you did a total recharacterization - or if you have incurred a penalty or additional taxes in a retirement account during [...]

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    Roth IRAs have been around for 20 years now. Lots of taxpayers have taken advantage of the tax-free benefits of these accounts by converting their traditional IRAs or employer plans to Roth IRAs. But many have hesitated. Maybe you are among those who held back. The year 2018 may be the year to change your mind. How Conversion Works When you convert your traditional IRA to a Roth IRA, your [...]

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    Question: I have a client who has some after-tax contributions in an IRA, along with pre-tax contributions.  They also have another IRA and 401(k)s.  My question is: Can we convert just the after-tax contributions to a Roth IRA or is it pro-rated as a % of the overall retirement assets? -William Answer: You will find the answer to this question on Form 8606. The form must be [...]

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    What is the simplest mistake you can make to cause major harm to your intended estate plan - and to the people you wish to provide for through that plan?   It is having outdated (or missing entirely) beneficiary designation forms for your IRAs, employer-provided retirement savings plans, life insurance policies and other valuable financial accounts. Happily, though, this is also the [...]

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    On Friday February 9, 2018, President Trump signed into law the Bipartisan Budget Act of 2018 (the “Act”). While the Act is best known for ending the nine-hour government shut down that took place on February 9, 2018, it also contained some tax-related provisions. One of the provisions broadly directed the IRS to make any changes necessary to ease the hardship distribution rules. This could[...]

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    A few weeks ago, I discussed the seemingly unintended impact the Tax Cut and Jobs Act (TCJA) had on the repayment of overpayments from employer plans. In essence, by eliminating the deduction of itemized miscellaneous expenses subject to 2% of adjusted gross income (AGI), the new law negatively impacted some repayments to employer plans - namely, repayments that are $3,000 or less. Similarly, by[...]

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    Question: Hi, I recently purchased your newsletter and I had an IRA question.  If a client dies before taking his required RMD for the year, does the estate need to take the RMD and pay the taxes before the account is transferred to the non-spouse beneficiary?  If not does the beneficiary have to take that RMD and pay the tax?  Thanks for your help Answer: This is a question that [...]

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    You may be interested in contributing to a Roth IRA but think your income is too high. You are probably aware that there are income limits that apply to Roth IRA contributions. For 2018, if you are married, your ability to make Roth IRA contributions phases out when your Modified Adjusted Gross Income (MAGI) is between $189,000 - $199,000 and between $120,000 - $ 135,000 if you are single. Are you[...]

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    Question: Hello, I was forced, due to health reasons, to retire at age 58 on December 8. I had been with my company for 34 years. I need to cash in my IRA fund for money to pay bills and insurance. What is the best way to avoid having to pay the IRS the 10% penalty before age 59½?  Thank you. Susan Answer: Dear Susan: First off, do you have any funds in the [...]

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    The U.S. Tax Code is a 74,000-page document with interrelating laws and regulations. Therefore, any time Congress enacts a piece of legislation as massive as the Tax Cuts and Jobs Act (TCJA), there are going to be unintended consequences, or as I like to call it, collateral damage. After passage, it's up to the IRS to sift through the damage and clarify any unresolved issues. IRS has already [...]

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    As you prepare your 2017 tax return, use the information you collect both to make the best IRA contribution choices for 2017 and plan IRA strategies for 2018. Six ways to consider: 1. Maximize IRA Contributions for 2017  2017 IRA contributions can be made until April 17, 2018, the due date for 2017 tax returns. The maximum IRA contribution for both 2017 and 2018 is $5,500 ($6,500 for persons [...]

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    Question: IRA Expert, I have a client that has $3M in a profit sharing plan (PSP). He is rolling over $1.5M of it to an IRA with me. He plans to take his RMD ($54,744) on that $1.5M after he turns 70½  on 4/3/2018 and give it directly to charities. He wants to wait until 2019 to take his RMD on the money staying in the PSP (and knows he must take it by 4/1/2019). Is it okay to take [...]

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    It has been widely reported that the Tax Cuts and Jobs Act eliminated the ability to recharacterize Roth IRA conversions as of January 1, 2018. On the other hand, it kept the ability to recharacterize IRA and Roth IRA contributions. Despite all the above, an unanswered question on Roth IRA conversions done in 2017 lingered. At the time of those conversions the taxpayer had the ability to [...]

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    The Tax Cuts and Jobs Act made sweeping changes to the tax laws. Brackets have been changed, deductions have been eliminated, and retirement plans have been affected. You may be wondering what the new law means for your IRA. Here are 5 things you need to know: 1. Recharacterization of Roth IRA conversions is gone. Starting for 2018 conversions, tax reform does away with your ability to [...]

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    Question: I would like to ask a personal question about withdrawing funds from my traditional IRA account. How can I use part of it for a down payment when buying a new home as a first-time home buyer, without paying much in taxes on the withdrawn amount? I appreciate your help. I am 70+ years old and still working. I recently purchased Mr. Slott's books, but they don't explain what to do[...]

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    529 Educational Plans Should Be Gaining in Popularity  Now that the dust has settled and the tax code has been “reformed,” it’s time to unpack those changes and analyze how best they can help you and your clients. One of the changes was the expansion of 529 educational plans. Under the Tax Cuts and Jobs Act, eligible expenses include up to $10,000 per person per year for K-12 educational[...]

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    The IRS says it will start accepting and processing 2017 tax returns on January 29 and expects to issue nine of 10 refunds within 21 days. To get the fastest refund possible, file electronically and request direct deposit of the refund amount. The IRS says it won't start processing paper returns until mid-February, and requesting a mailed paper check adds more time to processing and delivery. [...]

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    Question: Single - W-2 worker making $ 500 a week.  Few if any deductions. Contributes to employer 401K 3% of salary for a Traditional IRA. Is it legal to open up a separate Roth account say in Scottrade with $ 5500? Thank you for your help! -Mike Answer: Hi Mike, To make a Roth IRA contribution you must have taxable compensation. Your contribution will be limited to the [...]

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    In many households, married couples divvy up the responsibilities; one will handle the bills and banking while the other cooks and does the grocery shopping, or one will do the laundry while the other manages the yardwork and house. This split often extends to annual income tax responsibilities, even in couples who use a professional preparer. However, when couples submit joint returns, both are [...]

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    The year 1998 seems like a long time ago. In January 1998, Bill Clinton was in the White House and about to be impeached. The Unabomber was in the news and the Spice Girls were winning music awards. January 1, 1998 also brought us the launch of Roth IRA. However, unlike other ‘90’s memories, the Roth IRA is still going, stronger than ever. You may already be reaping the tax benefits of your [...]

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    Question: Greetings, No one seems to know the answer to this. Figured I would try you. Client has a 600k IRA. Doing a SEPP of 24k/yr. Has to give 400k to her ex-husband from her IRA. How to adjust SEPP? She is 57 and he is 65. Do we pro-rate the SEPP so she takes 8k/yr now and he takes 16k until the original term of SEPP would be finished? Seems unreasonable for her to still take 24k/yr [...]

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    One of the greatest benefits offered under ERISA are the anti-alienation provisions, which provide that benefits under a pension plan cannot be assigned or alienated. While there are some statutory exceptions, ERISA essentially prevents retirement assets from being joined in any legal process to collect a commercial debt. These actions include garnishment, attachments, and other similar legal [...]

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    An early start on tax planning is always good, but this year it is essential. The Tax Cuts and Jobs Act fully rewrites the tax code effective January 1, 2018. To get the most benefit from the changes, while avoiding mistakes under them, update your tax and financial strategies right away. Here are example areas where action at the start of the year can make a full-year difference: Kiddie Tax [...]

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    Question: Hello IRA Expert, I qualify for QCD (Qualified Charitable Distribution) as I am over 72 years old. I had recently read one of your articles on QCD and the 60-day rollover rule. I have automatic withdrawals of my RMD every quarter. The last automatic withdrawal was on Oct. 15, 2017 when I was overseas. I was overseas from September 22, 2017 to November 2, 2017 for family care-giving[...]

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    2018 is right around the corner. We will be dealing with massive changes to the tax code due to the enactment into law of the Tax Cuts and Jobs Act. Some of those changes are going to apply to you and some of those changes will affect your retirement and assets that you hope will go to your heirs. Are you ready? Any time there are significant changes to the tax code, it is essential that you [...]

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    Happy Holidays

    December 26, 2017

    We at the Slott Report would like to wish all our readers and their families a very happy holiday season! We thank all of you for taking your valuable time to read the Slott Report over the past year. We have heard from many of you and welcome your comments and feedback. Keep it coming! 2017 has been an interesting time for IRAs and other retirement plans. At the Slott Report, we have [...]

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    Question: Good Afternoon Mr. Slott, Based on the Path Act of 2015, which made the QCD permanent, and the information from Checkpoint “2017 Tax Reform: Special Study on Individual Tax Changes in the ‘Tax Cuts and Jobs Act’”, it appears the Path Act of 2015 was not repealed regarding QCD. Do you agree with my assumption? Thank you, Kim Answer: Hi Kim. Yes, [...]

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    Now that it looks like they’ve been spared from elimination in the most recent version of tax reform, it’s worth taking a look at nonqualified deferred compensation plans (“NQDC plans”). NQDC plans take different forms, including salary reduction arrangements, bonus deferral plans, excess benefit plans, and supplemental executive retirement plans. For some clients, this may be a way to [...]

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    This is the season for charitable giving. And this year, it is especially so for those who want to get the most tax benefit from charity deductions before the new Tax Cuts and Jobs Act becomes law. The Act effectively reduces the tax-saving value of the charitable contribution deduction for many. While details may change, at this writing the Act increases the standard deduction on joint [...]

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    Question: ED, I have attended 3 of your 2 day past boot camps and plan to attend in Orlando in Feb. 2018. I NEED YOUR HELP BADLY NOW!!!! I think my broker dealer is not reporting RMD’s to charities properly on the 1099R’s they issue. They are putting the same number in Box 1 and Box 2a even though they are issuing the checks to the charities. They also check Box 2b that says taxable [...]

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    Recharacterization is currently one of the few “do-overs” allowed under the tax code. Its days may now be numbered. The tax reform legislation currently pending in Congress would do away with recharacterization at the end of 2017. How Recharacterization Works Currently, if you do a Roth conversion, you have until October 15 of the following year to undo part or all of that conversion (and [...]

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    Question: Hello, I am a financial advisor in Dallas and appreciate all the training & education Ed has provided over the years to ML advisors like me. I have a question for Ed.  When meeting with a potential client, I uncovered a potential problem … And potential subsequent solution but am not sure if it’d work. The gentleman is 80, still working full-time and loves his [...]

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    Creating a self-directed IRA is relatively straightforward. It is not a creation of the tax code, but rather stems from the investment policies of the custodian that administers the IRA account. The agreement will allow you to diversify your IRA assets across a wide range of investments that you choose. However, when investing self-directed IRA assets, it is important that you and your advisor [...]

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    This holiday season, consider giving the gift of a big head start on lifetime financial security to the children in your family by giving them funds to contribute to Roth IRAs. There's no lower age limit on having a Roth IRA as long as a child has earned income. And an early start on saving can have a tremendous long-term payoff through the power of compound interest. Moreover, most children [...]

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    Question: Ed – I read an article from you on delaying RMDs if still working and over age 70.5. Does the code allow (or address in any way) someone who works merely one day in the next calendar year to delay the RMD from the employer plan? For example, employee turns 70.5 on April 1st, 2017. Retires on January 1, 2018. Therefore, calendar year of retirement is 2018…..so first required [...]

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    In 2014, the Tax Court ruled that an IRA owner could do only one, IRA-to-IRA or Roth IRA-to-Roth IRA, 60-day rollover in a 12 month period. This rule applies no matter how many IRA and/or Roth IRA accounts the IRA owner might have. The 12 months is a full 12 months, not a calendar year. The 12 month period will start with the date that IRA or Roth IRA funds are received. Example:  Cindy [...]

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    If you have an IRA, you should realize that what goes in must come out. In other words, your tax deferral will not last forever. Eventually, Uncle Sam will want his share. When you reach retirement age, required minimum distributions (RMDs) will kick in. Are you prepared? Take our RMD quiz and see how well you understand the basic RMD rules. Meet Laura, a baby boomer, who is about to embark on [...]

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    If you have a 401(k) account or other employer sponsored retirement plan, you probably already know that a distribution before you reach age 59½ is going to be subject to a 10% penalty. One exception to the 10% early withdrawal penalty allows participants in a qualified plan to take a distribution from the plan after leaving the job as long as they are age 55 or older. This rule, sometimes called[...]

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    Roth IRAs become 20 years old in January of 2018 and now hold more than $660 billion in retirement wealth, reports the Investment Company Institute (the source of the data in this article). Yet while Roth IRAs have become very popular among individuals who make annual contributions to IRAs, they are near totally avoided by persons who roll over big-dollar distributions from company retirement [...]

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    This week's Slott Report Mailbag looks into RMD rules and the "still-working" exception as it pertains to IRAs. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. You can find one in your area here. Question: Good Morning Mr. Slott and Colleagues, I just finish reading your book The Retirement Savings Time [...]

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    While there is a lot of focus on the proposed tax law changes that have a target effective date of 2018, there is something we can count on for 2018, the inflation adjusted retirement account limits. There are currently no proposed changes to the following limits. IRAs The IRA/Roth IRA contribution limit remains unchanged at $5,500 with a $1,000 catch-up amount for those who are age 50 or [...]

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    Tax Reform and Your Retirement Account

    House Republicans took the first shot at tax reform with the release of the Tax Cuts and Jobs Act on November 2. Now it is the Senate’s turn to weigh in. Not surprisingly, the Senate’s take on overhauling the tax code looks very different than the House version. You may wonder how your retirement account may be affected. Here are some highlights. As the details of the Senate plan are [...]

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    Are You Taking an RMD for the First Time in 2018?

    This week's Slott Report Mailbag examines inherited IRAs and retirees taking RMDs for the first time. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Question: I have a client who has inherited a Roth IRA from her father. Unfortunately, her father did not live the full five years after rolling his IRA into a [...]

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    60-Day Rollovers and Multiple Checks

    We continuously get questions on 60-day rollovers. Many times those questions revolve around a client receiving more than one distribution or wanting to complete the 60-day rollover with more than one distribution. Here is what you need to know. As a reminder, the one-rollover-per-year rule only applies to IRA-to-IRA 60-day rollovers and to Roth IRA-to-Roth IRA 60-day rollovers. For purposes of[...]

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    10 Things to Know About the Still-Working Exception

    Are you approaching retirement age and not looking forward to being forced to take unwanted required minimum distributions (RMDs) from your retirement account? You may be looking for a way to delay those distributions. You may have heard about the “still-working” exception, which can allow RMDs to be put off. Will this exception help you? Here are 10 things you need to know. 1. The [...]

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    Tax Reform Proposal Unveiled

    November 3, 2017
    Tax Reform Proposal Unveiled

    The much anticipated Republican proposal for tax reform has been released in the form of the Tax Cuts and Jobs Act, an over-400 page long major rewrite of the Tax Code.   It is sure to be controversial and subject to political dispute, and specific provisions are likely to change.  Here's how the major provisions that most matter to helping your clients read now. Individual Retirement [...]

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    The Rules and Strategies When You Inherit an IRA From Your Spouse: This Week’s Q&A

    This week's Slott Report Mailbag looks into RMDs and spousal IRA beneficiaries. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Question: Hello, I need to take my RMD (Required Minimum Distribution). I'm not currently working. I'd like to know if I can take my RMD and add it to my existing Roth IRA. [...]

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    IRA RMD Basics for the First Year’s Distribution

    Every year more Baby boomers move toward age 70 ½ and their first required distributions from their retirement accounts. For those boomers born between July 1, 1946 and June 30, 1947, you turned 70 ½ in 2017. You now need to take your first required minimum distribution (RMD) from your IRA accounts. Here are the basics of that first distribution. The date of the first RMD. Generally, you [...]

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    RMDs to a Trust Beneficiary of an IRA

    In the past couple of weeks, I have heard the wrong answer to the question of where required minimum distributions (RMDs) must go to a trust beneficiary from both an advisor and an IRA custodian. The advisor was dealing with a special needs trust as the beneficiary of the IRA. He thought that since a trust was the beneficiary the only distribution option was a 5-year payout. The trust was one [...]

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    Is Your IRA Haunted?

    October 23, 2017
    Is Your IRA Haunted?

    It’s Halloween season! This is the time for ghosts, witches, and trick or treating. What does Halloween have to do with your IRA? You might be surprised to hear that your IRA may be haunted. How can that be? Believe it or not, actions you take, or don’t take, can haunt your beneficiaries for years down the road. Many IRA owners think that naming their estate as their IRA beneficiary is a [...]

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    How Familiar Are You with NUA Rules? This Week’s Q&A.

    This week's Slott Report Mailbag examines NUA rules and the "still working" exception. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Question: I really enjoyed reading The Retirement Savings Time Bomb book and also your website. Thanks for all the information you share! I retired from Procter & [...]

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    Inherited IRAs – When do RMDs Begin?

    We are frequently asked when required minimum distributions (RMDs) begin when an individual inherits an IRA. As with most things related to IRAs, the answer is, it depends. Year of Death RMD If a Traditional IRA owner died after their required beginning date (RBD) and did not take their RMD for the year, the RMD will need to be paid to the beneficiary by December 31 of the year of death. The[...]

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    Rothification?

    October 16, 2017
    Rothification?

    Rothification is a term that is being tossed around a lot as tax reform takes center stage in Congress. What does Rothification mean? Proposals vary but, basically, it’s the idea of eliminating tax deductions and deferrals for retirement savings and instead mandating after-tax contributions with a payoff of tax-free earnings down the road. This is how Roth IRAs and Roth 401(k)s work so hence the[...]

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    Are You Over 70.5 Years Old and Still Working? Take Advantage of These Benefits: This Week’s Q&A

    This week's Slott Report Mailbag looks into 403(b) plans, RMDs, still-working exceptions, and trusts. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Question: I have a question in regards to taking an RMD from a 403(b) account. My client is still working, but only part-time for 10 hours per week. Does it [...]

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    October Retirement Deadlines

    October 11, 2017
    October Retirement Deadlines

    In a post last week, we talked about the Roth recharacterization deadline which is fast approaching. October 16, 2017 is the last date to recharacterize a 2016 Roth conversion. Another important deadline that is coming up is for trusts that became the beneficiaries of retirement assets in 2016. A qualifying trust can use the life expectancy of the oldest beneficiary of the trust to calculate [...]

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    Penalty-Free Retirement Account Distributions Now Available to Hurricane Victims

    Millions of Americans were affected by Hurricanes Harvey, Irma, and Maria. You may be one of them. If you are, there is some encouraging news. On September 29, President Trump signed H.R. 3823, the “Disaster Tax Relief and Airport and Airway Extension Act of 2017” into law. The new law provides a package of tax relief for Hurricane victims, including a provision that allows penalty-free [...]

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    Are You Over 70.5 Years Old and Still Working? Understand Your Options With RMDs: This Week’s Q&A

    This week's Slott Report Mailbag examines RMDs when you are still working past 70.5 years old and inheriting multiple IRAs. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Question: I have read some of your other articles, but I haven’t seen an answer to this question. I am 73 years old, still working, [...]

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    A Tale of 3 Cousins and Their Inherited 401(k) Plans

    This is the story of Al, Bob and Carl. Each cousin is the non-spouse beneficiary of his father’s 401(k) plan. Their fathers worked together at the local automotive factory for their entire lives and were all covered by the same plan. The default distribution option in the plan for non-spouse beneficiaries is a five-year payout. Al’s Story Al’s father named Al on the beneficiary form [...]

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