You may recall that the ability to recharacterize a Roth IRA conversion went away as part of the tax cut that passed in 2017. It wasn’t a major sticking point of the legislation, but it did create some concern about how it could affect those saving for retirement. However, I want to remind you that only recharacterization of Roth IRA conversions went away and that the ability to recharacterize other types of transactions still remains a possibility. For example, if you made a Roth IRA contribution but did not realize that you were above the income threshold to do so, Continue reading Not All Recharacterizations Have Gone Away
If you have an IRA, you are probably familiar with the one rollover per year rule it comes to rollovers between the same type of IRA (i.e. traditional to traditional IRA). As stated, the rule only allows one rollover per year between the same type of IRA, regardless of how many IRAs you have. If you have 3 traditional IRAs, you only get one rollover between them all. That’s it. It’s important to know when that 365 day period begins. It does not begin when the money ends up in the final retirement account, but rather when the distribution from Continue reading When Does the 365 Rule Start?
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
Do you want to know a little financial secret on how to avoid rollover headaches? It’s simple, don’t do them! I’m not kidding. Rollovers, especially 60-day rollovers, can be complex as there are limitations on how many you can do each year and how long you have to move the funds. If you don’t read up on the rules or track the time between when the funds are disbursed to when they must go back into an account, you and your retirement funds could be in for a world of hurt. And yes, there are ways to avoid a rollover Continue reading The Best Way to Avoid Rollover Complications
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.