A: All tax-deferred retirement accounts are subject to RMDs. These include traditional and rollover IRAs, 401ks, 403bs, and 457 deferred comp plans. RMDs do not apply to ROTH IRAs or taxable accounts such as trust accounts, individual accounts, or joint tenant.
IRA’s & Qualified Plans
A: Not really. RMDs are always taxable. Although… Your RMD may only be partially taxable if you made a combination of pre-tax and after-tax contributions to your IRA. I hate after-tax IRA contributions for the reasons so eloquently explained in #7 of this blog post: IRA Contribution FAQs. You can donate the funds to charity, …View Article
A: There is a tax of 50% on the amount you were supposed to withdraw…assuming the IRS catches it. Alternatively, you can try explaining to the IRS that it was an honest error and reasonable steps are being taken to make up for the shortfall. You must file Form 5329 with a letter of explanation …View Article
A: The company that holds your IRA usually calculates it for you, although it is your responsibility. The math is pretty simple: Step 1 – Find out your IRA account balance as of the previous December 31. Step 2 – Divide by the number from the Uniform Life Expectancy Table that corresponds with the age …View Article
A: You will need to start taking the required minimum distribution at 70½. Do not confuse the age at which you are required to take a minimum distribution (70½) with the age at which you can take a distribution without penalty (59 ½). For some reason, the IRS does not like whole numbers…or simplicity. Speaking …View Article
A: No. There are no RMDs from a ROTH IRA during your lifetime or that of your spouse, assuming he or she is your sole beneficiary. Any beneficiary other than your spouse will be required to take an RMD starting the year after he or she inherits the account. The good news is the RMDs …View Article
A: This is possible. The only reason you would do this is if you earn too much to contribute directly to a ROTH in the first place. It is a bit of a loophole and a very shrewd move if I do say so myself. However, a couple caveats: 1) you can only do this …View Article
A: No. This is why I hate non-deductible IRA contributions! They complicate the rest of your life because once you have both before- and after-tax contributions in an IRA, you are responsible for tracking the proportion of the total IRA balances upon which you have already paid taxes. To make matters worse, you must consider …View Article
A: Yes, you can contribute to a traditional IRA, but before you do, let’s make sure the deduction is going to be tax-deductible. Your contribution will not be deductible if you are an “active participant” in a company-sponsored retirement plan and you earn above the following thresholds: IRA AGI Limits If contributor is a participant …View Article
A: April 15th is the deadline for the prior year. So, if you contribute between January 1st and April 15th, make sure you designate to the custodian whether the contribution is for the current or prior year. The IRS gives you until the following Monday in years that April 15th falls on a weekend.