The Slott Report

When driving your car, most of the time you’re going forward. But sometimes, like when you back into a parking spot in anticipation of beating the traffic after a sporting event or concert, you must shift gears to reverse. So it is with rollovers between 401(k) plans (or other employer plans) and IRA’s. Most of the time you’ll be considering a rollover from the 401(k) plan to an IRA. But sometimes it makes sense to consider a “reverse rollover” – from an IRA to a 401(k).

With the year half over, it’s prime time to huddle, refocus your team and commit to reaching your 2019 goals—for your clients and your advisory business. Here are 7 strategies advisors can leverage now to notch a win for clients in the 2019 retirement planning game: 1. Analyze the Film: Review 2018 Tax Returns The 2018 tax season is now over for most taxpayers, and it has been a learning experience for many. This is the first time both advisors and clients will know the actual effects of the Tax Cuts and Jobs Act. Review clients’ 2018 returns and use these results to plan for 2019. Assess the effect of the Qualified Business Income (QBI) Deduction on 2018 tax returns to plan for 2019 results. Did retirement plan contributions affect the client’s QBI deduction or their tax bracket?

‘Tis the season for bee stings and mosquito bites. Just like those summer irritations, 401(k) plan loans have their own annoying rules that can make them risky transactions. Fortunately, a provision of the 2017 tax reform law applied a little hydrocortisone to help relieve the itch. One advantage that 401(k) plans have over IRA’s is that 401(k)’s (as well as many other employer-sponsored plans) can allow participants to borrow against their accounts. 401(k) plans are not required to allow loans, but most do.

Happy 4th of July to all the loyal readers of the Slott Report! This summer holiday is a time for barbeques. This is a time when all ages come together to celebrate. Families will gather to grill hot dogs, roast marshmallows and watch fireworks. If the conversation around the grill should happen to turn to retirement savings, here are 4 IRA tips, one for each generation of guests, to share while you celebrate: It’s never too early to start to save. Here is a tip to share with younger guests who might be just starting their careers. With student loans and the high cost of housing, the last thing on a millennial’s mind is saving for retirement. However, when it comes to retirement, young people have a huge advantage – time.

Did you inherit an IRA from someone who is NOT your spouse? This is not uncommon. Maybe you inherited from a sibling or a parent or a friend. If this is your situation, you will want to proceed with caution. For nonspouse beneficiaries a wrong move can result in disastrous consequences. So, take your time and do it right. Step one is to carefully explore your options. What are a nonspouse beneficiary’s options when it comes to the inherited IRA? Under the tax code, nonspouse beneficiaries can take advantage of the “stretch” IRA. This means you can set up a properly titled inherited IRA and then take required minimum distributions (RMD)s based on your life expectancy.

Question: Your advice, articles, publications and books I’ve purchased over the years have been great and most informative. Great job! My question is with regards to NUA – I retired recently (age 66) and had a company 401(k) to which I contributed over the years and will likely not make any withdrawals until required RMD’s. Within the company 401(k) plan I invested in selected bond funds, stock funds, small cap, a value fund, target funds, mid cap funds, international funds and our company stock fund option. (Some of the company stock I purchased and some was a company gift over the years).

Prior to 2002, a default option for paying out required minimum distributions from an inherited IRA to a beneficiary was the 5-year rule. If the IRA owner died before their required beginning date and an election was not made in a timely manner, the account had to be closed by December 31 of the 5th year following the year of death. In 2002, new regulations issued by the IRS changed the default payout to the life expectancy of the designated beneficiary. The 5-year requirement for most beneficiaries was eliminated.

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?

Question: I set up a Roth outside my employee retirement plan. I retired on 10-01-2018. I set up an automatic contribution to my Roth IRA from my checking account and, up to this day, still continue to contribute to the Roth IRA . Shall I opt out since I’m retired now? Your advice is deeply appreciated. Thank you very much. Sincerely, Ester Answer: Hi Ester, Contributing to a Roth IRA in addition to your employer plan is a great way to increase your retirement savings.

he road to retirement is long. Along the way you may need or want to move your retirement funds. Maybe you are leaving a job or maybe you are just looking for a new investment strategy. When the time comes to make a move, you will want to be sure that everything is done correctly. Rolling over retirement funds can be tricky and the consequences of a mistake can be serious. Here are 6 things about rollovers that every IRA owner needs to know. 1. How rollovers work A 60-day rollover starts with a distribution from a retirement plan payable to you. The distribution can be from a company plan or an IRA. You will have receipt of the funds.