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Roth IRA

Roth Conversions and 2020 RMDs: Today's Slott Report Mailbag

Question: In December of 2018 I did my first partial Roth IRA conversion into a new Roth IRA. I’m older than 59 ½. In December of 2019 I did my second partial Roth IRA conversion into the same Roth IRA opened in December of 2018. The traditional and Roth IRA’s are held at the same company, so the conversions are easy. Does the 5-year waiting period apply to each conversion, or just the first one? Answer: We get a lot of questions about the five-year rule for Roth IRA distributions! What makes this area so confusing is that there are, in fact, two different five-year rules that may come into play.

Rollovers and Inherited IRAs: Today's Slott Report Mailbag

Question 1: I have a very simple ROTH IRA question. I borrowed money from my ROTH IRA with the intention of paying it all back in 60 days. To avoid any penalty, must I make one repayment of all the money I borrowed? Or, can my repayment be made in two parts, all within the sixty days? Question 2: Am I allowed to convert my inherited Traditional IRA to a Roth IRA?

Recharacterization of IRA Contributions is Still Here

It happens. You have made a 2019 contribution to the wrong type of IRA. All is not lost. That contribution can be recharacterized. While recharacterization of Roth IRA conversions was eliminated by the 2017 Tax Cuts and Jobs Act, recharacterization of IRA contributions is still available and can be helpful in many situations. Maybe you contributed to a traditional IRA and later discovered the contribution was not deductible. Or maybe you contributed to a Roth IRA, not knowing that your income was above the limits for eligibility.

RMDs & Roth IRAs: Today's Slott Report Mailbag

Question: I took 25% of my 2020 required minimum distribution (RMD) from an inherited IRA on March 15, 2020. Can that be “undone” in accordance with the CARES Act and if so, how? Thanks. Audrey Answer: Hi Audrey, The CARES Act waives RMDs for 2020. The waiver does include inherited IRAs. However, any amounts already taken from an inherited IRA by a nonspouse beneficiary cannot be rolled over. That is because the regular rollover rules still apply, and those rules do not allow a nonspouse beneficiary to do rollovers. If you are a spouse beneficiary, the rules are different.

Roth Contributions and RMDs: Today's Slott Report Mailbag

Question: Hi Ed, Hope all is well. I have a client that received the HEART benefit as her spouse passed away a few years ago. We immediately moved those dollars into a Roth for her. My question is, as we are doing some year-end planning, can I add to this Roth by doing a conversion, or do I need to open up a separate Roth for her? Answer: The HEART Act allows a beneficiary of military death gratuities to contribute those funds to a Roth IRA. The Roth contribution can be made without regard to the annual contribution or income limits. The contribution must be done within

Roth IRAs and the Backdoor Roth Conversion: Today's Slott Report Mailbag

Question: Hello. I am an avid reader. Thank you for the information you provide. About opening/establishing a Roth IRA: I opened my 1st and only Roth IRA on April 12 of 2018 at the age of 59 ½, funding it with an initial deposit and designating that deposit as a 2017 deposit/contribution. In August of 2018 I made a 2nd deposit as my 2018 Roth IRA contribution. Does the 5-year rule (to withdraw earnings tax free) begin in 2017 or 2018? Does the 5-year rule start on April 12, the actual date of the Roth IRA establishment, or does the date default to January 1st regardless of the actual establishment date? Thanks again, Jeff Answer: Jeff, The start date for your Roth IRA is officially January 1, 2017.

Why You Should NOT Care about the Roth IRA Five-Year Rules

Roth IRAs first arrived over twenty years ago. A lot has changed since 1998. That was the year that Google was founded and an electronic pet called a Furby was one of the most popular Christmas gifts. However, some things haven’t changed so much. Impeachment is once again all over the news and here at the Slott Report we are still being asked many questions about how the five-year rules for Roth IRA distributions work. We probably get more questions on this topic than just about any other.

Roth Conversions and the 60-Day Rollover Rule: Today's Slott Report Mailbag

Question: Hello Ed, I have received differing views on making a 401(k) conversion to a Roth IRA. I'm a 64 year old retired federal employee and plan to transfer all my funds from the TSP to my traditional IRA. From there I plan to make annual conversions to my long established Roth IRA. Is there an issue with the five-year rule that would prevent me from being able to make withdrawals from the Roth during the next few years? Thanks for your help. Dan Answer: Hi Dan, Your plan works! You can roll over your TSP to a traditional IRA and make series of conversions to a Roth IRA without worries about taxes and penalties on any Roth distributions. How is this possible? Well, all your converted funds can be accessed tax and penalty free because you are over age 59 ½.

Roth IRA & Roth 401(k) – The Basics

Roth IRAs and Roth 401(k) plans are incredibly popular, and why wouldn’t they be? Both offer tax-free earnings and allow the account owner to pass tax-free dollars to their beneficiaries. However, despite the ubiquity of Roth accounts, there are some common misunderstandings about how Roth IRAs and Roth 401(k)s operate and interact with each other. Confusion swirls around such basic concepts as contribution limits, eligibility and Roth rollovers. For example, income limits apply to Roth IRA contributions only There are no income limits for designated Roth 401(k) plan salary deferrals. Contributions are the initial building block of Roth IRAs.

Best Thing Since Sliced Bread?

Roth IRAs are a wonderful way to save for retirement. A person can sock away $6,000 a year (plus another $1,000 if they are age 50 or older) and the earnings will grow tax free. Plus, most custodians allow Roth IRA dollars to be invested in an incredibly wide array of options – mutual funds, stocks, ETFs - a veritable smorgasbords of choices. Can’t beat that with a stick! Did I mention that Roth IRAs have no required minimum distributions at age 70 ½? (Put that in the “pro-Roth” column.) What about age restrictions on who can contribute? You’re telling me that anyone can contribute to a Roth IRA as long as they have earned income and do not exceed certain income limits?

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