On January 21, Ichiro Suzuki was elected to Major League Baseball’s Hall of Fame by the Baseball Writers Association of America. It takes 75% of the writer’s support to gain entry, and Ichiro was chosen on 393 out of 394 ballots. Ichiro joined Derek Jeter (396/397) and Ken Griffey Jr. (337/440) as players to garner 99+% of the votes. (Yankees great Mariano Rivera was the only player elected unanimously, back in 2019.) While a person can reach Cooperstown without 100% of the votes, such is not the case with many IRA transactions. A single misstep, a lone “missed vote,” and the outcome could be completely different. Here are a handful of transactions where a 1% shortfall can cause the entire house of baseball cards to come tumblingdown.
Missing the 60-Day Rollover Window by 1 Day. IRA owners have 60 days to complete a rollover. There is no wiggle room. Try to do the rollover on Day 61 and it will be rejected.
One Rollover Per Year. Speaking of rollovers, IRA owners can only do one 60-day rollover in any 12-month period. You did a little $3,000 rollover 10 months ago, and now you take a $3 million distribution with the intent to roll that over as well? Sorry, the one-rollover-per-year rule dictates that the $3 million distribution is taxable and can’t go back to a traditional IRA.
Super Catch-Up Birthdate. There is a new “super catch-up” option for workplace plans like a 401(k) or SIMPLE IRA. Participants who turn ages 60, 61, 62 or 63 during the calendar year can contribute additional dollars to their plan. You turned age 64 on December 31? That means you are ineligible for the extra catch-up for that entire year.
Death on December 31, 2019. Continuing with last-day-of-the-year deadlines…this is somewhat morbid: If an IRA owner died on December 31, 2019, then all of his living beneficiaries would get the full lifetime stretch. If he hung on for a few more hours and passed away on January 1, then we must consider the 10-year rule. (Thank you, SECURE Act for compressing the payout window.) This could shave decades off the payout structure ofan inherited IRA.
Still-Working Exception. On the flip side, retiring on December 31 is a bad thing when it comes to the still-working exception and delaying required minimum distributions (RMDs)from employer plans. The RMD will be due for that same year if you retire on December 31. In the case of the still-working exception, it behooves a worker to hang on for one more day and retire on January 1.
Prohibited Transactions. Do you have an investment property in your self-directed IRA? Better keep an arm’s length. You can’t do anything to improve the property yourself. If you stop by and change a lightbulb, that’s a prohibited transaction, and the entire IRA is deemed distributed.
QCDs and Early Distributions. Want to do a qualified charitable distribution (QCD)? Very generous! Just don’t try to do it when you are age 70 and 180 days. You must be age 70½. Same deal with avoiding the 10% early IRA distribution penalty. You must be 59 AND a full six months.
Roth Conversions and IRMAA. You did a Roth conversion that pushed your modified adjusted gross income just $1 into an Income-Related Monthly Adjustment (IRMAA) bracket? These are cliff brackets. One dollar over and you just bought yourself a year of elevated Medicare surcharges.
Ichiro will soon have his bust in the Baseball Hall of Fame. Get sideways with the IRA rules, if only by a single day or dollar, and you’ll be busted.
If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.
99%: Good Enough for the Hall of Fame, but Not for Certain IRA Transactions
Specializing in private wealth management, we provide education, guidance, and strategies to help you achieve a tax-efficient retirement income.
Specializing in private wealth management, we provide education, guidance, and strategies to help you achieve a tax-efficient retirement income.
Investment advisory services offered through Donato Wealth Management, PLLC, dba Empower Wealth Management and Empower Wealth & Tax (“Empower Wealth Management” or “EWM”),
an SEC registered investment adviser that only conducts business in jurisdictions where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. The firm is not engaged in the practice of law or accounting.
The information presented is believed to be current. It should not be viewed as personalized investment advice. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. You should consult with a professional adviser before implementing any strategies discussed. Content should not be viewed as an offer to buy or sell any of the securities mentioned, or as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation. Personal investment advice can only be rendered after the engagement of EWM, execution of required documentation, and receipt of required disclosures. All investment and insurance strategies have the potential for profit or loss. Asset allocation and diversification will not necessarily improve an investor’s returns and cannot eliminate the risk of investment losses. Past performance is no guarantee of future results. For more information, please go to https://adviserinfo.sec.gov and search by our firm name or by our CRD #305031.
Insurance products and tax services are offered through Senior Tax and Insurance Advisors, PLLC, dba Empower Wealth Group (“Empower Wealth Group” or “EWG”). Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products. They do not in any way refer to investment advisory products offered through EWM. Rates and guarantees provided by insurance products and annuities are subject to the financial strength of the issuing insurance company; not guaranteed by any bank or the FDIC. EWG is not affiliated with or endorsed by the U.S. Government, Social Security Administration, nor the federal Medicare program. You may be contacted by a licensed insurance agent. Calling the number above will direct you to a licensed insurance agent. EWG may not offer every plan available in your area. Any information provided is limited to plans available in your area. Please contact Medicare.gov or 1-800-MEDICARE.
EWM and EWG are both affiliated companies of Empower Wealth, LLC (“Empower”). Investment adviser representatives of EWM may have a financial incentive to recommend tax and insurance products and/or services offered through EWG which presents a conflict of interest. This conflict is addressed by EWM’s adoption of its Code of Ethics, which requires that all EWM’s Associated Persons place the interest of clients ahead of their own. Clients of EWM are also free to choose their own tax and/or insurance professionals and are under no obligation to utilize the services offered through any related entities or persons associated with Empower.
Strategic Partners listed on this page are not employees of EWM and are not affiliated through common ownership.
We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE to get information on all of your options.
© Empower Wealth Management All Rights Reserved.
