How Will You Pay Taxes on IRA Distributions?

It is highly likely that most–if not, all–your taxable income in retirement will consist either or IRA distributions and investment returns. If that turns out to be the case, you will have more than one way to pay taxes owed on that income to the IRS. You can either make quarterly estimated tax payments or have tax withheld from the distributions. Let’s look at the withholding option first. Withholding does not open you up to the complexities of estimating your tax payments on distributions, which can lead to penalties–or overpayment–if done incorrectly. Also, withheld tax is viewed as if it Continue reading How Will You Pay Taxes on IRA Distributions?

Inherit an IRA? Don’t Forget About RMDs!

If you inherit an IRA from someone–most likely a parent–who has passed away and that person was taking required minimum distributions (RMDs) at the time of passing, then you must take the RMD for the year in which the person passed, if they hadn’t already taken it. This can be easy to forget. Even if you properly title the IRA as an “inherited IRA,” you will still need to take that RMD. Thus, you should check with the IRA custodian if you ever inherit an IRA and stay on top of whether an RMD must be taken, which would be Continue reading Inherit an IRA? Don’t Forget About RMDs!

Don’t Let Income Get in the Way of Making an IRA Contribution

Did you know that even if you have too much income to make a deductible contribution to a traditional IRA, you can still make a nondeductible contribution? There are two main reasons why you would do this: to obtain tax deferral for investments or to make a backdoor contribution to a Roth IRA. Remember, there is nothing in the tax laws that places income limits on eligibility to make nondeductible contributions to a traditional IRA or to convert a traditional IRA to a Roth IRA. It should be noted however, that your nondeductible contribution cannot exceed $5,500 (or $6,500 if age Continue reading Don’t Let Income Get in the Way of Making an IRA Contribution

No Need to Rush a 401(k) Rollover

Most likely, if you’ve ever left an employer (i.e. getting laid off, retiring, taking another job, etc.), you’ve probably thought about rolling over your your 401(k)–if you have one–into an IRA. While this makes sense in the vast majority of such situations, it isn’t an automatic for every such situation. There may be times when you leave an employer and decide that it’s best not to do a rollover of your 401(k). There are various reasons as to why that might be. For example, if you are happy with your former employer’s plan and like the options offered, then you Continue reading No Need to Rush a 401(k) Rollover