Don’t Forget The IRA Contribution Correction Deadline!

Did you make an IRA contribution only to later find out that your were not eligible to make that contribution? Or maybe you made a contribution and later decided that you wanted to use that money elsewhere? Whatever the reason, just know that you can essentially take back a Roth IRA or Traditional IRA contribution, provided you file the paperwork for doing so on time. The deadline for correcting an IRA contribution is October 15 of the year after you made the contribution. That might seem like a random deadline, but I can assure you it is not. It’s exactly Continue reading Don’t Forget The IRA Contribution Correction Deadline!

Miss an RMD? Don’t Panic, But Don’t Brush It Off, Either.

It can be easy to forget about required minimum distributions (RMDs), especially as you move into retirement or if you inherit an IRA. Now, forgetting to take an RMD isn’t the absolute end of the world, but it should not be taken lightly. The penalty to missing an RMD is half the amount that was to be distributed, which is quite harsh and can be a substantial amount of money depending on the size of your retirement savings. So, what should you do if you forgot to take an RMD or you learned that you needed to take one from Continue reading Miss an RMD? Don’t Panic, But Don’t Brush It Off, Either.

The Cautions of Backdoor Roth IRA Conversions

A backdoor Roth IRA conversion can be tempting if you are considering retiring early and are currently over the income limits for a Roth IRA contribution. In case you are unfamiliar, a backdoor Roth IRA conversion is where you contribute money to a traditional IRA and then convert that money into a Roth IRA. This is a useful transaction for those who earn too much income to contribute to a Roth IRA as Traditional IRAs have no income limits. It’s also a perfectly legal transaction. However, when doing a backdoor conversion, keep in mind that the taxman will get his Continue reading The Cautions of Backdoor Roth IRA Conversions

Oh No! What to Do if You Forgot to Take an RMD

Missing a required minimum distribution (RMD) is not laughing matter. The IRS will not let you off with a slap on the wrist or a small fine. In fact, they can actually be quite harsh and can include up to 50% of the missed amount. However, you can request relief from the IRS, which may or may not grant that request depending on the circumstances. If you find that you missed an RMD, the first thing you should do is to withdraw the RMD money from your account as the IRS won’t even consider your request for relief. Once you Continue reading Oh No! What to Do if You Forgot to Take an RMD

Retirement Account Mistakes Happen. Just Make Sure You Correct them.

The rules surrounding retirement savings accounts can be complicated. As such, it’s not uncommon for people to make mistakes when it comes to saving for retirement. Luckily, the rulemakers realize this also and allow for corrections of many retirement savings account errors and mistakes. It should be noted however, that many mistakes are not penalty free, regardless of whether you correct the error in a timely fashion or not. However, taking the steps to correct an error can keep those penalties to a minimum and potentially save you thousands of dollars in both taxes and penalty fees. Furthermore, the corrective Continue reading Retirement Account Mistakes Happen. Just Make Sure You Correct them.

Qualified Medical Expenses and Your IRA

Taking money out of your IRA is frowned upon in the retirement saving and financial planning industry. Not only does doing so lessen the amount of money you have for retirement, but taking money out early can put you are risk of incurring an early distribution penalty, which could result in you losing more money. The IRS has made exceptions, however, to the early distribution penalty because even the government realizes that life can be unexpected and place people in situations that may necessitate reaching retirement money. There are a number of exceptions to the 10% early distribution penalty, but Continue reading Qualified Medical Expenses and Your IRA

Make Sure You Understand Early Distribution Exceptions

Thinking about taking an early distribution from your retirement plan and believe you can do so without getting hit with a penalty? You should be very, very careful in doing so. Yes, there are times when taking an early distribution is appropriate and you can avoid an early distribution penalty, but such situations are often few and far between. Aside from avoiding early distributions at all costs, you should really speak with a certified financial planner or retirement expert as part of the consideration process if you are fairly serious about doing so. While there are a number of ways Continue reading Make Sure You Understand Early Distribution Exceptions

Beware of This Roth IRA 5-Year Rule

It’s common knowledge among Roth IRA owners that if you make annual contributions to your Roth IRA, you can access those funds penalty-free at any time. It sounds simple, but people can forget that the rule only applies to annual contributions and that things can get tricky when it comes to converted funds. If you seek to access converted funds in a Roth IRA and are under age 59 ½, you must wait either 5 years before accessing those funds or until you reach age 59 ½. The holding period begins on January 1 for the year in which the conversion happened, Continue reading Beware of This Roth IRA 5-Year Rule