The Slott Report | Ed Slott and Company, LLC

The Slott Report

3 Reasons to Roll Over Your Retirement Funds to an IRA

More than 40 million Americans have filed for unemployment since the Corona virus pandemic hit in in the middle of March. With job loss can come questions of what to do with retirement savings such as your 401(k) plan. A rollover to an IRA may be good move for you. Here are three reasons why: 1. You can continue your retirement savings. When you contributed to your employer’s plan you made the smart decision to save for retirement. Rolling those funds over to an IRA will allow you to preserve those dollars for your retirement and even add to them in the future. You could keep your funds in an IRA and make IRA contributions or you could move the funds over to a future employer’s plan.

The SECURE & CARES Acts Impact on Retirement: What Your Clients Need to Know Now

The Setting Every Community Up for Retirement Enhancement (SECURE) Act single-handedly upended many long-standing retirement rules when it became effective on January 1, 2020. Shockingly, the SECURE Act was pushed to the back burner when all the world was impacted by the coronavirus pandemic. Only three months after SECURE was introduced to the American public,

QCDs Under the CARES Act and IRA Contributions: Today's Slott Report Mailbag

Question: Since no RMD in 2020 is required, what will the tax treatment be for QCD checks to charities written before the CARES Act became effective? Will 1099-R dollar amounts be included in AGI and charitable contributions only deductible if taxpayer itemizes on Schedule A? Do you recommend against making further QCD checks in 2020? Mike Answer: Qualified charitable distributions (QCDs) are alive and well in 2020. There is a good deal of confusion about this likely due to the fact that the CARES Act eliminated required minimum distributions (RMDs) for the year.

Does Membership Have Its Privileges? Spouse Beneficiaries & the 10-Year Payout

Gold members of a national hotel chain, big airline or just the local club expect lofty benefits for their dedicated patronage. Bronze members have access to A, B and C. Silver members have access to A, B, C, plus D, E and F. At the highest level, gold members earned not only A through F, but also whatever additional allowances their premium membership affords. Are gold members cut off from any exclusive discounts that a bronze or silver member receives?

One More CARES Act Misconception

The Coronavirus Aid, Relief, and Economic Recovery (CARES) Act continues to cause confusion. In the April 22, 2020 Slott Report, we discussed four misconceptions surrounding the new law. In this article, we add one more: If your employer refuses to offer CRDs, you can’t qualify for the special CARES Act tax breaks. This statement is false. The CARES Act allows workplace retirement plans [e.g., 401(k), 403(b) and governmental 457(b) plans] to offer a new kind of distribution – a coronavirus-related distribution (CRD).

Inherited IRAs and RMDs Under the CARES Act: Today's Slott Report Mailbag

Question: Hi, My question is: Does the SECURE Act affect inheritors of a Roth IRA account? If so, in what way, and why - since it is not a pre-tax account? I look forward to your reply. Thanks. Regards, Vikram Answer: Vikram, Yes, the SECURE Act does affect inherited Roth IRAs for those who inherit in 2020 or later. (Any Roth IRAs inherited prior to 2020 fall under the old rules.) Under the SECURE Act, only eligible designated beneficiaries (spouses, minor children of the account owner, disabled individuals, chronically ill individuals, and beneficiaries not more than ten years younger than the deceased IRA owner) can stretch RMD payments over their own life expectancy.

Conversion Nightmares

With markets down, many IRA owners are thinking this may be the time for a Roth IRA conversion. Converting when account values are down can be a good bargain. You pay a tax bill on a lower balance now in exchange for potential tax-free growth down the road when the markets bounce back. This can be a great strategy, but you need to be careful in executing your conversion transaction. We have heard more than one horror story of IRA owners who have gotten into trouble trying to convert IRA funds online on a custodians’ website, sometimes accidentally pressing a wrong button or putting a decimal point in the wrong place.

CRDs and Roth Conversions – Abuse of the Rules?

The coronavirus-related distribution (CRD) rules for Roth conversions have a gaping hole. An “affected person” (as we have defined in previous blogs), is entitled under the CARES Act to withdraw up to $100,000 from their IRA or workplace retirement plan. A CRD avoids the 10% early distribution penalty for those under 59 ½, can be repaid to a qualified retirement account within three years, and allows the account owner to spread the income (and subsequent taxes due) over a three-year period.

CONVERTING WAIVED RMDS AND PAYING BACK CORONAVIRUS-RELATED DISTRIBUTIONS: TODAY’S SLOTT REPORT MAILBAG

Sir: The CARES Act includes a waiver of RMDs for this year from company savings plans and IRAs. I am in the minority of retirees that took my 2020 RMD in January 2020, withheld 20% for taxes and am now finding out that I "missed" the 60-day rollover window to put the money back into my IRA by no fault of mine. Since RMDs are essentially eliminated for 2020, why can't I put the entire amount into my Roth IRA? Assuming I can do that "conversion," is there a time limit to do that? Thank you for considering my dilemma.

IRA Protection Against the Evil Genie in the Lamp

The evil genie in the IRA lamp wants your money. He roars with laughter at the thought of you facing hard times. Given an opportunity, he will line the pockets of creditors with your IRA dollars, and he will serve your remaining non-qualified financial assets to the vultures, who will drag the accounts into the gutter and pick them clean. The evil genie must be forced to remain inside the IRA lamp. Fortunately, there are protections in place to keep creditors from rubbing the lamp and intentionally releasing the genie. These protections, which provide shields for bankruptcy and lawsuits, include the following:
 

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