The Slott Report | Ed Slott and Company, LLC

The Slott Report

Three Things to Know About the Year of Death RMD

There are always questions that come up as to the correct way to handle the required minimum distribution (RMD) for the year of death of the IRA owner. Here are three things you need to know about the year of death RMD. 1. The RMD for the year of death will only need to be taken if the IRA owner died after his required beginning date. The required beginning date for IRAs is April 1 of the year following the year the IRA owner reaches age 70 ½. If the IRA owner dies before this date, there is no RMD required for the year of death. This is true even if the IRA owner is already age 70 ½ and even though he has already taken part of the RMD.


Question: I turn 70 ½ this year and my last day of work was September 30, 2019. Am I required to take an RMD from my work profit sharing 401(k) plan by April of 2020 and, if so, is the RMD calculated on the 12/31/18 account balance? My employer will roll my profit sharing 401(k) into my IRA on January 2, 2020. Thank you for your help.


Retroactive adjective ret·​ro·​ac·​tive | extending in scope or effect to a prior time or to conditions that existed or originated in the past; especially: made effective as of a date prior to enactment, promulgation, or imposition. I like that word, and it’s fun to say. Retro-active. Plus, it is powerful. Making something retroactive gives one the ability to reach back in time and change things for better or worse. “Retroactive to January 1 of this year, all employees earned a weekly $100 bonus.” Or, “Retroactive to last Monday, the speed limit on Main Street is reduced to 25 mph from 35 mph. Any driver who exceeded 35 mph from then forward will receive a speeding ticket in the mail.” “Retroactive” is a superpower that occasionally rears its head in the retirement world and can turn back the hands of time:

The SECURE Act and IRA Beneficiaries: Today's Slott Report Mailbag

Question: I attended the two-day event in Washington DC. Is there any news on the attempts in Congress to change the stretch-out? Jim Answer: Hi Jim, It sounds like you are asking about the status of the Setting Every Community Up For Retirement Enhancement Act of 2019 (SECURE Act). This proposed legislation would do away with the stretch IRA for most beneficiaries and replace it with a ten-year payout period. The SECURE Act overwhelmingly passed the House this spring. It is currently being held up in the Senate. There were some reports that it would be passed by the Senate last month, but that turned out not to be the case. We are watching this bill carefully to see if Senators can all come to agreement on it or if it will be brought to the Senate floor. Currently, the holding pattern continues, but there are some who believe action could be taken later this year. Stay tuned.

Four October 15 Deadlines You Don’t Want to Miss

October is upon us. This means fall is in full swing. Along with football, pumpkin-spice everything and stocking up on candy for trick-or-treat come four important October 15 deadlines you will not want to miss! 1. Did you contribute too much to your traditional or Roth IRA for 2018? Maybe you were 70 ½ or over in 2018 and made a contribution to a traditional IRA. Or, maybe your income ended up being higher than you expected and it turned out you were ineligible for the Roth IRA contribution you made. If you made an excess contribution to your traditional or Roth IRA for 2018, you will want to fix that mistake by withdrawing the contribution, plus net income or loss attributable.


Knowing your limits is important when you’re sitting in a bar and realize that you have to drive home. It’s also important to know the dollar limits that apply when you participate in more than one company retirement savings plan or you change jobs during the year. Deferral limit. There are actually two limits at play. One is a limit on the amount of elective deferrals you are allowed to make in any calendar year. With one exception, the deferral limit is based on the total deferrals to all of your plans. So, this limit is usually a per person limit. The limit is indexed periodically and for 2019 is generally $19,000, or $25,000 if you’re age 50 or older as of the end of the calendar year.

IRA Rollovers and Required Minimum Distributions: Today's Slott Report Mailbag

Question: I am still working at age 71 and don't really need the required minimum distributions (RMDs) from my rollover IRA. The IRA was funded largely with distributions from a tax-qualified pension plan and a tax-qualified 401(k) plan. Some deductible contributions were made many years ago as well. I would like to transfer some of the IRA into my current employer's 401(k) so as to reduce RMDs until I terminate my employment with my current employer. I am not a 5% owner of the company, so I don't currently have to take RMDs from the 401(k).

Highway to the Danger Zone

My son is 14. I make every effort to expose him to a wide array of cultural elements. A variety of music. Plays. History. Food. Movies from the 80’s and 90’s are a significant slice of the “Understanding Social References” pie chart. Ferris Bueller’s Day Off, Breakfast Club, Shawshank Redemption, Terminator, Sixteen Candles. Currently queued up on the DVR is Top Gun. Goose and Maverick pushing the limits in their F-14 Tomcat fighter jet. Iceman. Jester. “Never leave your wingman.” Kenny Loggins singing “Highway to the Danger Zone.” If a person wants to recklessly fly through the jet wash of the 60-day rollover window and use their IRA funds for some risky pursuit, they better stick close to their advisor wingman. Peril lurks. Engines could flameout.

Exceptions to the 10% Penalty for Both IRAs and Company Plans

Retirement accounts are supposed to be for saving for retirement. If you tap your retirement savings before reaching age 59 ½, you run the risk of being hit with the 10% early distribution penalty. However, there are exceptions to this penalty. Some apply just to IRAs and some apply just to employer plans. However, the following six exceptions apply to BOTH distributions from IRAs and employer plans. 1. Death A distribution taken from an inherited retirement account after the death of the owner is never subject to the 10% penalty. It does not matter what the age of the owner was or what the age of the beneficiary is.

Traditional IRAs and Roth IRA Contributions: Today's Slott Report Mailbag

Question: Here is the situation. The mother is deceased and the father is in jail. He has two minor kids that need the money out of his traditional IRA. Could all of the money be taken out and considered a hardship distribution to avoid the 10% penalty on the entire account? Answer: Unfortunately, no. There is no such thing as a “hardship distribution” with IRA accounts. A 10% early withdrawal penalty generally applies to IRA withdrawals taken before age 59 ½. But the tax code includes several exceptions to the 10% penalty for withdrawals taken for certain specific reasons. For example, taking a withdrawal to cover the costs of higher education expenses, first time home buying, and health insurance if you are unemployed all qualify for the penalty exception.

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