The Slott Report

Question: If your employer contributes to either a SEP IRA or a SIMPLE IRA, can you (the employee) also contribute to a Roth IRA? Regards, Alfred

The House Ways and Means Committee has released a draft of proposed changes to retirement accounts, including adding income limits for conversions and eliminating the back-door Roth conversion strategy. These proposals are designed to raise revenue and are likely, at least in part, a response to recent headlines about large Roth IRAs held by billionaires. Unless otherwise noted, the proposals would be effective for 2022. Here is what this means for your retirement account.

Are you moving assets between IRAs or from a company plan to an IRA (or vice-versa)? You should know that using a direct transfer is a much better idea than doing a 60-day rollover. Direct transfers avoid all of the possible issues which can occur with 60-day rollovers:

When an IRA owner taking required minimum distributions (RMDs) dies before removing his annual RMD, that year-of-death RMD (or whatever portion remains) must still be withdrawn. Upon passing, the year-of-death RMD immediately becomes the responsibility of the beneficiary. If it is not withdrawn before the end of that same calendar year, it is a missed RMD and potentially subject to a 50% penalty. Even if the IRA owner dies late in the year, December 31 remains the deadline for the beneficiary to take the year-of-death RMD.

President Biden has declared September to be National Preparedness Month. The goal is to encourage Americans to be more prepared for natural disasters. Unfortunately, from flooding on the east coast to fires on the west coast the news headlines seem to be full of these devastating events, and an increasing number of Americans have been affected.

Question: Ed I heard on a podcast that you are the number one authority on IRAs, so I want to go to the most informative source. Could you answer this question for me?

Question: I appreciate all of the information you pass along, both through PBS and now through the American College. In one of your recent presentations, you discussed QCDs and their often-overlooked value. I recommend QCDs to “eligible” clients. Since the adoption of the new age 72 for RMDs, the question I have is this: As I understand the rules, people who are age 70 1/2 or older can do QCDs up to $100,000 annually. But now RMDs don’t start until age 72. Does this create a “split” definition as to who can use QCDs? That is to say, is there a gray area for those in the “gap” for the beginning age for RMD's?

Yes, you are allowed to own real estate in an IRA. Of course, not every IRA custodian will accommodate such an investment, but that doesn’t mean it is forbidden. If you want to own a beach house in your IRA, or a commercial building, or an apartment complex, you have every right to do so.

The other day an advisor called us with an issue that comes up frequently, especially in these tumultuous times. His client had made an IRA contribution for 2021 and was planning on deducting that contribution. However, his job situation changed, and he became an active participant in a retirement plan at a new job.