Whether a long or short explanation is required, our members have our undivided attention and take every question seriously to fill in any information gaps.
Each day we receive dozens of retirement-related questions from advisor members of the Ed Slott Elite IRA Advisor Group. Conversations range from incredibly complex to obscure to, “I just need you to confirm what I was thinking.”
Here is a random sampling of some recent communications:
I was told by a very successful person that Roth conversions were ending. Is this true? This is definitively NOT true. There was a proposal in the Build Back Better bill to limit certain Roth conversion, but those proposals never materialized. There are no limits on Roth conversions.
Can a business owner contribute to both a SEP and a Roth IRA? Yes. Participation in a SEP has no impact on whether a person can also contribute to a Roth IRA. However, you must still abide by the Roth IRA income phase-out levels.
My client is being laid off in December. He turns 55 in 2023. Can he use the age 55 exception on his 401(k)? To leverage the exception, you must separate from service in the year you turn 55 or later. If he can delay his termination until January, then yes. If not, then unfortunately, he will not be able to use the age-55 10% penalty exception.
A 90-year-old tried to roll over his $1.9 million IRA in January. The bank erroneously put all the money into a regular brokerage account. He got sick and his son just discovered the mistake. Are we stuck with the distribution? Not stuck. One of the 12 reasons for self-certification when the 60-day rollover window is missed is, “an error was committed by the financial institution making the distribution or receiving the contribution.”
An annuity company paid out an IRA to my client that she inherited from her brother. She is an eligible designated beneficiary (EDB), so we can deposit that check into an inherited IRA for the stretch, correct? Sorry, no. She might be the sister and an EDB, but non-spouse beneficiaries cannot do 60-day rollovers with inherited dollars.
My client did a $150,000 Roth conversion. Now he is over the income limits to contribute to a Roth IRA. Is there any fix? No worries! Roth conversions do NOT count against total income for Roth contributions. See IRS Publication 590-A, “Worksheet 2-1. Modified Adjusted Gross Income for Roth IRA Purposes.”
With the market downturn, my client has a lot of capital losses. Can we use these to offset a Roth conversion? Only $3,000 of capital losses can be used to offset a Roth conversion.
Other recent inquiries touched on successor beneficiary scenarios, year-of-death RMDs and Roth 5-year clocks. We answered questions about excess contributions and ex-pats as beneficiaries. Trusts, 72(t) schedules, Roth conversions, NUA, pro-rata and how the 10-year rule works were all popular topics. Our members keep us on our toes, and we are happy to assist.
There is a mountain of confusion and misinformation out there. If you are an advisor and have interest in Ed Slott's Elite IRA Advisor Group℠, consider joining us February 24 and 25 at our upcoming training event in Las Vegas.
By Andy Ives, CFP®, AIF®
Ed Slott and Company, LLC