Are You Ready for the Son of Secure?

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Are You Ready for the Son of Secure?

By Sarah Brenner, JD
Director of Retirement Education

By Sarah
                                                          Brenner, JD

On May 5, the House Ways and Means Committee unanimously passed the Securing a Strong Retirement Act of 2021. According to lawmakers, the proposal is designed to pick up where the SECURE Act of 2019 left off and help increase retirement savings even more. The so-called “Son of SECURE” would make more big changes to retirement accounts. Here are some highlights:


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AARP

HOW TO TAKE TAX-FREE ROTH IRA WITHDRAWALS

By Ed Slott, CPA

Every month, IRA Expert Ed Slott is taking your questions about Individual Retirement Accounts on AARP:

I'm 63 and have a Roth IRA. When can I access these funds totally tax- and penalty-free? The current stock market has produced some big gains in my Roth, and I could use some funds now. But I am worried about a tax bill if I withdraw the earnings on my Roth funds. I know there is a five-year rule, but when does that term begin?

The 10 percent early-distribution penalty doesn't apply to you, since that only comes into play when you withdraw certain Roth funds before age 59 1/2. Because you are 63, you will never pay that penalty on any Roth funds you withdraw. More good news: It's likely you won't owe any income taxes on any funds you withdraw from your Roth IRA.

The five-year holding rule begins on the first day of the year for which you made your initial Roth IRA contribution (or converted a traditional IRA to a Roth). Once you've held your Roth funds for five years and have reached age 59 1/2, all funds you withdraw from your Roth will be tax- and penalty-free whenever you withdraw them.


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Mailbag


Q: We have a client that owns two substantial IRA accounts plus a smaller beneficiary IRA. Does the beneficiary IRA have its own RMD rules (the client has owned it for 10 years and has been taking RMD’s from it based on the old stretch IRA rules)? Or can the beneficiary IRA be lumped together with the other IRAs for RMD calculation purposes? If so, can this year’s total RMD be withdrawn from the beneficiary IRA without having to touch the other two IRAs?

Answer

Q: I have a client (husband and wife filing jointly) with earned income. Can they continue to contribute to a Traditional IRA beyond age 73?

Answer

Q: My question pertains to distributions from an Inherited IRA and an Inherited Roth IRA for a non-spouse (daughter). For example: Decedent (father) was age 75 at the time of death in 2020; daughter (sole beneficiary) was 53 last year. I understand as long as she begins RMDs in 2021 from both her Inherited Traditional and Inherited Roth IRA’s, she will not be forced to withdraw all funds within 5 years, but can withdraw over 10 years? Also, which IRS Table is used and is it the attained age of the beneficiary (in this case - 54 in 2021), or of the decedent if he/she were still alive?

Answer

Q: We have a client who was 19 years younger than her spouse. He passed away this year. We are planning to keep this as an inherited IRA for now. Can we move the assets to her own IRA at any time?

Answer

Q: If you are an employee who participates in a 401(k) and you are a non-owner employee and retire at, for example, age 73, do you have to take an RMD in the year you retire or can you take your RMD by April 1 of the year following retirement? If you can take your RMD by April 1 of the following year, does that mean you have to take two RMDs in that year?

Answer

Have a question for America's IRA Experts?
Email your questions to us at mailbag@irahelp.com. Selected questions will be featured every Thursday in the Slott Report.


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InvestmentNews keeps the pulse of the retirement world, and right now, the IRS and required minimum distributions are at the front of everyone's mind. This special webcast with IRA expert Ed Slott will break down what the IRS has said, and what advisers and clients need to know going forward.

The discussion will focus on:

  • Clarity on the current guidance around the "10-year rule" for Required Minimum Distributions.
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