Misconceptions About the Still-Working Exception
Regardless of the topic, we could all use an occasional refresher. Retirement account rules are incredibly complicated, and we all have our blind spots. Even seasoned financial advisors with extensive client lists can overlook certain details. I had a conversation recently with a respected professional who was operating on a misconception regarding the still-working […]
Backdoor Roth Conversions and IRA Losses: Today’s Slott Report Mailbag
QUESTION: Thank you for all you do to educate the public. I’m hoping you guys can settle a debate that’s been going on with a few financial advisors and CPAs regarding the 5-year rule for Roth IRA conversions. I was under the impression that a non-taxable conversion can be withdrawn at any time, even within […]
Taking Tax-Free Distributions from Your HSA
Health Savings Accounts (HSAs) may be one of the biggest tax breaks currently available. If you have a qualifying high-deductible health plan, you may make a deductible contribution to an HSA. There are no income limits for eligibility to contribute. You can then take tax-free distributions from your HSA to pay for qualified medical […]
Self-Certification After 60 Days: 12 Reasons
There are two ways to move money from one IRA to another: a direct transfer or a 60-day rollover. With direct transfers, the funds are sent directly from one custodian to another. The IRA owner has no ability to use the dollars while they are in transit, and the transaction does not create any […]
First RMD Year and Roth IRA 5-Year Period: Today’s Slott Report Mailbag
Question: Our client is 75 years old. He just retired on January 1, 2025. The company has recognized his retirement date as being January 1, 2025. When must he take his first required minimum distribution (RMD)? Rick Answer: Hi Rick, If the client actually worked on January 1, 2025, then his first RMD year […]
How the Compensation Limit Affects Retirement Plan Benefits
Many retirement plans base employer contributions on employee compensation. For many years, Congress has limited the compensation that can be taken into account for those contributions. Fortunately, this dollar limit only applies to very highly paid employees. The compensation limit increases most years based on inflation. For 2024, it was $345,000, and it went […]
New Reporting for 2025 QCDs
The IRS has introduced a new code for the reporting of qualified charitable distributions (QCDs) by IRA custodians on Form 1099-R. How QCDs Work QCDs first became available in 2006, and they were made permanent in 2015. The strategy has become increasingly popular among IRA owners who are charitably inclined. With a QCD, IRA […]
Roth Conversions and 401(k) Distributions: This Week’s Slott Report Mailbag
Question: Since I retired in 2020, each year I have been converting amounts from my employer plan to my Roth IRA. I will be age 73 in 2026. Can I take my required minimum distribution (RMD) amount and convert that to my Roth IRA? Thanks, Thomas Answer: Hi Thomas, Unfortunately, this strategy will not […]
Check Both Boxes for Tax-Free Roth IRA Earnings
Roth IRAs follow strict distribution ordering rules. Contributions come out first, then converted dollars, and then earnings. It does not matter how many Roth IRAs a person has, or if the accounts are held at multiple custodians. The IRS doesn’t care. All the IRS sees is one big Roth IRA bucket, and within that […]
How Plan After-Tax Contributions Are Taxed When Converted
The April 23, 2025, Slott Report article, “After-Tax 401(k) Contributions Shouldn’t Be an Afterthought,” discusses how 401(k) after-tax contributions can be moved into Roth accounts through in-plan Roth conversions, the “mega backdoor Roth IRA,” or split rollovers. This article will explain the tax implications of these strategies. If you have made after-tax contributions to your plan, any earnings […]