The Slott Report | Ed Slott and Company, LLC

The Slott Report

Inherited IRAs and SIMPLE IRA Creditor Protection: Today's Slott Report Mailbag

Question: In 2021, my wife inherited an IRA from her sister who was 4 years younger. My wife therefore is an EDB (eligible designated beneficiary). Her sister was 66 years old at date of death. My wife has been taking RMDs based on her own age. What happens when my wife dies? Do all the following beneficiaries have 10 years to deplete the inherited IRA? Are there RMDs that need to be taken each year for those beneficiaries? If so, is the RMD based on the factor that my wife was using?

Poison Ivy: IRA Scenarios to Avoid

I got into some poison ivy and am suffering the consequences. It takes a few days for the welts to appear, but they are in full bloom. While I did take precautions before starting my yardwork (gloves, long sleeve shirt, etc.), in retrospect I could have been more careful. The frustrating part is, there isn’t a whole lot you can do once the swelling appears. Ice, some anti-itch spray, try not to scratch too much, and just methodically work through this incredibly uncomfortable irritation.

A Better Way of Understanding the Once-Per-Year Rollover Rule

The “once-per-year” rollover rule is one of those IRA rules that has serious tax consequences and cannot be fixed if violated. Breaking the rule results in a taxable distribution and a 10% early distribution penalty if you’re under age 59 ½. Plus, any rolled over funds are considered excess IRA contributions that are subject to a 6% annual penalty unless timely corrected.

Required Minimum Distributions: Today's Slott Report Mailbag

Question: Hello and thank you for all the great, helpful information you continue to send out. I am due to take my first RMD (required minimum distribution) in 2024 which would make my required beginning date April 1, 2025 if I understand correctly. My intention is to empty my traditional IRA next year and convert it to my existing Roth. My question is, if my traditional IRA shows a zero balance by my required beginning date, would that still require a RMD be taken for 2024? I’d like to know if I can convert the entire account or if I have to take an RMD and then convert the rest. I think the answer is I would have to take an RMD, but am not 100% sure. Thanks so much, Dana

HSA Benefits That May Surprise You

You have likely heard of Health Savings Accounts (HSAs), and you may even understand the basics of how an HSA works. These accounts are really not too complicated. If you have a qualifying high deductible health plan, you may contribute to an HSA. Then, you can take tax-free distributions to pay for qualified medical expenses.

Inherited Roth IRA: RMDs or No?

QUESTION: Do required minimum distributions (RMDs) apply to inherited Roth IRAs? ANSWER: It depends on who the beneficiary is. Owners of traditional IRAs must start taking RMDs when they reach their required beginning date (RBD). That date is generally April 1 of the year after a person turns 73 (or 72 prior to SECURE 2.0, or 70 ½ prior to the original SECURE Act).

INHERITED ROTH IRA RMDS AND MERGING IRAS: TODAY’S SLOTT REPORT MAILBAG

Question: Hello, Are you required to take out RMDs (required minimum distributions) on an inherited Roth IRA? The original owner was 82 when he passed away. The funds were left to his nephew, so I understand the 10-year rule will apply. Thanks for your help, David

Mandatory Roth Catch-up Contributions Required for 2024

One of the more controversial provisions of the new SECURE 2.0 law concerns 401(k) catch-up contributions. Most 401(k) plans – as well as 403(b) and governmental 457(b) plans – permit employees who are age 50 or older to make catch-up contributions. The limit for catch-ups in 2023 is $7,500, allowing for total elective deferrals of up to $30,000.

Conversion as a Gift to Your Beneficiaries

Do you have an IRA you are thinking about converting to a Roth IRA? There are many benefits to converting. You trade an immediate tax bill for the promise of tax-free earnings and distributions down the road. However, one benefit you may not have considered is the benefit to your beneficiaries. Inheriting a traditional IRA will have very different tax consequences than inheriting a Roth IRA. Converting your IRA to a Roth IRA is really a gift to your beneficiaries.

Inherited Roth IRAs and Roth Conversions: Today's Slott Report Mailbag

Question: Am I correct to assume if I leave my Roth IRA to my 2 adult children, they will have to take all the money out by the end of year 10 and they will have NO taxes to pay on it because it is a Roth? They can take some out each year with NO taxes due, but have the option to leave it all in the account for 10 years, if they desire. Thank you! Louise
 

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