This week the Ed Slott and Company IRA Discussion Forum featured a question about how having multiple retirement accounts impacts RMDs. Want to know the answer too? Read on to find out…Ok, so you have multiple retirement accounts. Can you take your required minimum distribution(s) from just one of them, leaving the others untouched? Well… …it varies… …a lot.First things first – you need to know how many different accounts you have and what type of accounts they are. Is it an IRA? A 401(k)? A 403(b)? Something else altogether? And how many of each type of retirement account do you have? Make sure you have this information correct, because getting it wrong and missing a required distribution could land you a 50% penalty for the missed amount that you should have taken.Read More

One of the many advantages of converting to a Roth IRA is that there are no mandatory required minimum distributions (RMDs) during the account owner’s lifetime. This could be a very attractive feature for those who do not need their RMDs to support their lifestyles. Leaving this money inside the Roth IRA alleviates the occurrence of a tax bill, provides the opportunity for continued tax-favored investment growth, and will most likely result in future tax-free distributions.Many high-income retirees had been counting down the days until 2010 when they finally would be eligible to convert to a Roth IRA. The year 2010 truly is historic in this regard, as it marks the first time anyone can convert to a Roth IRA without being hindered by an income or tax filing restriction. Prior to 2010, individuals with modified adjusted gross incomes over $100,000 or those who filed federal income tax returns under the “married, filing separate” category were prevented from converting to a Roth IRA. These shackles have been removed.Read More

Here is this week’s Slott Report Mailbag.1.I am about to retire and expect to convert regular IRA money to Roth each year. I will determine the amount based on what my resulting tax bracket will be including the possibility of additional Medicare premiums.My question has to do with the 5-year rule on Roth withdrawals.Is it 5 years from the original (first) Roth is established or does the clock start each year for that year’s conversion?If so, is it necessary or recommended that separate accounts be established for each conversion until the 5-year period is up at which time that year’s account can be rolled into a main Roth account?Read More

With the Stretch IRA, an IRA owner designates a younger-generation family member as the IRA beneficiary. The beneficiary can then elect to receive the required minimum distributions (RMD) based on his or her longer life expectancy, thereby extending the opportunity for tax deferral. Overall, there should be enhanced benefits for the IRA beneficiary and, potentially, for downstream heirs.Read More

Here is another edition of The Slott Report Mailbag with three consumer questions and our answers.1.I was 70 1/2 in February 2009. I didn’t take a RMD in 2009. I must take my first RMD this year. What age do I base the amount on, my age now or my 2009 age? Thanks.Answer:You first required distribution will be in 2010 and you will have to take it by 12/31/10. You were age 70 1/2 last year, but there were no required minimum distributions for 2009. You will use your age 72 for this year since you are calculating your 2010 distribution (that will be your attained age on 12/31/10). The life expectancy factor for age 72 is 25.6. The account balance you will use is the balance on 12/31/09.2.Can federal employees who contribute to a TSP, Thrift Savings Program, have part or all of their TSP contributions converted to a Roth IRA, and if so, what is the best way to do it in terms of the taxes that would be owed?Read More

It is time for another edition of The Slott Report Mailbag.1.I have seen a lot of information regarding the options for folks to convert regular IRAs to Roth IRAs, and even vice versa. However, the reversion of Roth to regular seems to be only addressed IF the Roth IRA had been converted from a regular IRA to begin with. Are there opportunities for an IRA that was originally set up as a Roth IRA to be converted to a regular IRA? My wife allocated some funds in late 2009 into a Roth IRA, with the anticipation that the distribution of those funds would enjoy a lower tax rate when redeemed. However, the investment has deteriorated considerably in value in the short time that it has been in the Roth IRA and the thought is that if we convert that Roth to regular, we can–at least–write off the initial invested amount as an IRA contribution on the 2009 tax returns and take our chances in the future when the investment is distributed.Thank you in advance for your reply.Read More

Copyright 2009-2010 Ed Slott and Company, LLC. All rights to any text on this forum is reserved.2010 and the Return of RMDsWith the beginning of a new year and a new decade, comes the return of required minimum distributions (RMDs) on IRAs and defined contribution plans.There are no changes in the RMD rules. None. You will calculate your distribution just as if 2009 did not happen. You will use the prior year end account balance — that would be 12/31/09, not 2008. If you are the account owner, you will use the age you turn on your birthday this year to find your life expectancy factor. If you are a beneficiary, you will use the life expectancy factor determined in the year after death and subtract one from that factor for each subsequent year, including 2009.Read More