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Determining Tax on Roth IRA Distributions in 5 Easy Steps

What are the ordering rules? Roth IRA distributions can consist of contributions, converted funds and earnings – or any combination of the three. To determine what your distribution is, you must use “ordering rules” which dictate the order in which these categories of Roth IRA money must be withdrawn. All Roth IRAs are considered one Roth IRA for distribution purposes. A Roth IRA distribution will consist first of any Roth IRA contributions.


Calculating Your RMD in 5 Easy Steps

What is an RMD (required minimum distribution)? An RMD is the minimum amount that must be withdrawn from a retirement account each year. When are you subject to RMDs? Traditional IRA owners are subject to RMDs beginning in the year in which they turn age 73. The RMD age used to be 70½, but the SECURE Act raised the age to 72 for anyone who turned 70½ in 2020 or later.


Navigating Qualified Charitable Distributions in 5 Easy Steps

What is a qualified charitable distribution (QCD)? A QCD is a distribution from an IRA that goes directly to a qualifying charity and is not included in the taxable income of the IRA owner. A QCD cannot be made from an employer plan. A QCD can be up to $100,000 a year, per individual. 1. Either an IRA owner or a beneficiary can do a QCD.


Protecting an IRA from Prohibited Transactions in 5 Easy Steps

What is a prohibited transaction? A prohibited transaction occurs when an IRA owner uses IRA assets in a self-serving or self-dealing manner that improperly benefits the IRA owner. When should you look for a prohibited transaction?


To Convert or NOT To Convert in 5 Easy Steps

What is a Roth IRA conversion? A Roth IRA conversion is the process of moving IRA or employer plan assets to a Roth IRA. 1. When will you need the money? If you have an immediate need for the funds or need them to continue your current standard of living, then a Roth IRA conversion is probably not for you.


Leaving a Legacy – 3 Differences Between Life Insurance and Roth IRAs

Life insurance and Roth IRAs have a basic structure in common: they are both wealth transfer tools that help facilitate an efficient transfer of assets from one generation to the next and can provide a tax-free legacy. Despite their similarities, life insurance and Roth IRAs are very different, and the rules that apply to one don’t always apply to the other. In fact, this is the case more often than not.


Planning for a Disclaimer in 5 Easy Steps

What is a disclaimer? A disclaimer is a formal refusal of an inheritance (or part of an inheritance) by a beneficiary. By creating a “path” for disclaimed assets to follow, a skilled planner can provide a beneficiary with the option to pass assets to alternate beneficiaries. 1. Make sure you name contingent beneficiaries. Naming a contingent beneficiary directly on the beneficiary form is good practice and a pivotal part of most disclaimer planning.


Avoiding the 10% Penalty in 5 Easy Steps

What is the 10% penalty? A 10% early distribution penalty applies to taxable distributions made before age 59 ½. Distributions made after age 59 ½ are not subject to the 10% early distribution penalty.


Are You Leaving Your Employer? You Have Six Options For Your Employer Plan Retirement Funds

1. Convert to a Roth IRA The plan assets don’t need to first move to an IRA. You can do a full or partial conversion as a direct rollover or a 60-day rollover. The advantages? Income-tax-free withdrawals of the converted amount may be done at any time; more investment options; flexibility in estate planning; less paperwork on a distribution; and flexibility in naming beneficiaries. 2.


Avoiding Charitable IRA Beneficiary Mistakes in 5 Easy Steps

Can IRAs be used to benefit a charity? IRAs can be a great source of funds to provide a benefit for a favorite charity, but using these funds can create a number of traps that must be voided in order to maximize benefits to both the charity and other IRA beneficiaries Name the charity directly on your beneficiary form.