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 In This Update:
  • RMDs for spousal beneficiaries
     
  • Ruling to Remember: The new fund company CAN'T hold IRAs
     
  • Q of the Month: What if I don't have earned income?
     


 Resources  Expert Professional
 Assistance


 

 
 
 
 
 
 
 
 
 
 
 
 

?? Question of the Month: What if I don't have earned income?


Q: I am a retiree and my wife and I have been talking about planning (even more than we already have) for our retirement in retirement. I want to know if I can contribute to a Roth IRA with no "W2" income, but instead with company pension income and taxable Social Security income? What are the rules on this?

A: IRA contributions can be made ONLY if you have earned income. The safe harbor is "W2" income. Pension and Social Security income are NOT considered earned income. If your spouse has enough earned income, a contribution can be made based on her income. Contributions can be made to a Roth IRA regardless of age (as long as you have earned income and income does not exceed certain levels). Contributions to traditional IRAs cannot be made once you reach the year you turn 70 1/2.


 

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YEAR-END IRA CHECKLIST
Critical Items to Check Before the New Year


The December issue of Ed Slott's IRA Advisor Newsletter highlights some of the most overlooked items with a year-end IRA checklist.

YOU CAN ALSO CLICK HERE TO VIEW THE CHECKLIST ON OUR WEBSITE.

The items include: RMDs (required minimum distributions), splitting IRAs, 2009 plan beneficiaries, 2010 Roth conversions, lump sum distributions and checking beneficiary forms.

LEARN MORE ABOUT THE CHECKLIST IN ED SLOTT'S IRA ADVISOR NEWSLETTER



Inside Ed Slott's IRA Advisor Newsletter

Year-End IRA Checklist
Critical Items to Check Before the New Year

  • RMDs
  • Splitting IRAs
  • 2009 Plan Beneficiaries
  • 2010 Roth Conversions
  • Lump Sum Distributions
  • Check Beneficiary Forms

Post-Death Roth IRA
Recharacterizations

  • The Issues
  • The Resolution
  • Advice to Advisors

Guest IRA Expert
 
William M. Upson, CLU, ChFC
Strategic Asset Management Group
Walnut Creek, CA

 
Tax-Free Roth Conversion Alternative

2010 Index of Articles

2010 IRA Experts

Acknowledgments

If you are not already an Ed Slott's IRA Advisor Newsletter subscriber, you can preview past issues before subscribing.

December Key Focus


RMDs FOR SPOUSE BENEFICIARIES

When a spouse inherits an IRA, he or she has options other beneficiaries do not have. We like to refer to the spouse as the king or queen of beneficiaries. Keep in mind that the spouse must be the sole beneficiary of the account in order to qualify for these options.

Delayed Distributions
If the spouse is the sole beneficiary, and the IRA owner dies before his RBD (required beginning date), the spouse can delay required distributions until December 31st of the year the deceased IRA owner would have turned 70 1/2 years old, regardless of the age of the spouse.

Recalculate Life Expectancy
A spouse who is a sole beneficiary can recalculate life expectancy each year. Take advantage of this by setting up separate accounts.

Treat IRA as the Spouseís Own
A spouse who is the sole beneficiary can treat the IRA as her own. Take advantage of this by setting up separate accounts.

Spousal Rollover
Only a spouse beneficiary can roll over her share of an IRA into her own IRA. There is no deadline for rolling over the spouseís separate share. The spousal rollover, though, is best accomplished when the spouse is the sole beneficiary of a separate IRA as opposed to being one of several beneficiaries and having to split out her share after the IRA ownerís death.


 

Ruling to Remember


PRIVATE LETTER RULING 201047029

"John" took a distribution from his IRA to move the funds to another IRA with a different financial institution. He wanted to invest in a different fund to take advantage of the unique investment offerings.

Before making the transfer, he inquired about the new financial institutionís ability to legally handle and house IRAs. He was told on multiple occasions that the financial institution could indeed hold IRAs. "John" then made arrangements to move his distributed amount to the new financial institution, and he duly noted on the institutionís questionnaire that he wished the funds to be maintained in an IRA.

However, the new account was opened as a standard taxable brokerage account and the distributed amount was deposited into it. "John" soon realized the error, but after the 60-day rollover window, and requested a Private Letter Ruling.

The IRS wavied the 60-day rollover requirement in respect to the contested funds. "John" was granted a 60-day extension from the issuance of the ruling to contribute the funds into an eligible retirement account because he received incorrect information from the financial institution about its ability to house IRAs.

LESSONS TO LEARN:

1. When you open the new account you should receive an IRA agreement as part of your paperwork. If you donít get an IRA agreement, you donít have an IRA. Always ask the financial advisor for a copy of the IRA agreement.



We wish all of you a happy and healthy holiday season and a prosperous New Year. Cherish your time spent with friends and family!
 
Happy holidays,
 
Ed Slott and Company
 
 
 
 
 
 
 
 




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