EXCESS CONTRIBUTION FIX: SAME IRA, DIFFERENT DOLLARS
If I pour too much water into a glass, removing liquid from a different glass does not correct the problem. The excess water must be removed from the “offending” receptacle. Such is the case with excess IRA contributions. If too much money is deposited into a particular IRA, those excess funds must be removed from […]
IRS GIVES GUIDANCE ON PENALTY-FREE WITHDRAWALS FOR FINANCIAL EMERGENCIES AND FOR VICTIMS OF DOMESTIC ABUSE
If you take a taxable withdrawal from your IRA or 401(k) (or other company plan) before age 59 ½, you normally have to pay a 10% penalty in addition to taxes. But Congress continues to carve out exceptions to this penalty, and there are now 20 available. In Notice 2044-55, the IRS recently gave us guidance […]
ROLLING OVER YOUR IN-PLAN CONVERSION? WATCH OUT FOR THE RECAPTURE RULE
More and more Americans have retirement savings in Roth 401(k)s. With their rising popularity come some complicated tax issues. These funds are often rolled over to Roth IRAs at retirement or when a participant changes job. While the rollover process to the Roth IRA is fairly straightforward, the rules for determining the taxation of these […]
FIVE THINGS TO KNOW ABOUT ROTH 401(K)S
A recent survey found that over 80% of 401(k) plans now offer employees the option of making Roth 401(k) employee contributions. More and more employees are now taking advantage of that opportunity. (In this article, I use the term “Roth 401(k) contributions” to also include Roth employees made to 403(b) and municipal 457(b) plans.) Here […]
ROTH 401(K) TO A ROTH IRA ROLLOVER: HOW DOES THIS WORK?
As retirement account questions go, this is the shortest inquiry with the longest answer. When asked what factors to consider and what 5-year clocks apply with a Roth 401(k) to Roth IRA rollover, I take a big breath and say, “Pull up a chair.” There are a number of variables to determine. Probing questions must […]
GOVERNMENT REPORT HIGHLIGHTS CONFUSION OVER 401(K) DISTRIBUTION OPTIONS
A recent government report highlights how confused 401(k) participants are when they have to decide what to do with their savings after leaving employment. Tax rules require 401(k) plans (and 403(b) and governmental 457(b) plans) to provide a written notice when participants become entitled to a distribution that can be rolled over. The notice must explain they […]
WHEN A REVERSE ROLLOVER MAKES SENSE
In a famous “Seinfeld” episode, George Costanza, unemployed, living with his parents and without a girlfriend, decides to do the opposite of what he would normally do. It pays off for him big time as he lands a front office job with the New York Yankees (after criticizing the owner during a job interview) and […]
QUALIFIED CHARITABLE DISTRIBUTIONS (QCDS) AND SOLO 401(K) PLANS: TODAY’S SLOTT REPORT MAILBAG
Question: Can a QCD (qualified charitable distribution) be made from a 401(k) plan? Thanks! Answer: No, QCDs can only be made from IRAs and inactive SEP or SIMPLE IRAs. One possible workaround would be for you to roll over all or a portion of your 401(k) funds into an IRA and then do a QCD […]
ROLLOVERS AND SUCCESSOR BENEFICIARY RULES: TODAY’S SLOTT REPORT MAILBAG
QUESTION: My client is terminating employment and rolling over the funds from his 401(k). He was told that the funds must be rolled over to a “rollover IRA” and kept separate from any other IRA funds that he has. He already has another IRA, and he just wants to roll over the funds to that […]
ONE 60-DAY ROLLOVER PER YEAR?
SCENARIO: In one calendar year, Jessie completes the following transactions: Takes a partial distribution from her 401(k) and does a 60-day rollover to an IRA. Does a 60-day rollover from one traditional IRA to another traditional IRA. Takes another partial distribution from her 401(k) and, within 60 days, deposits the cash directly into a Roth IRA. […]