Monthly Archives: May 2016

IRA Benefits for Married Couples

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Four IRA Benefits

‘Tis the season for weddings! You’ve probably heard the saying that marriage has its Married IRA Benefitsbenefits. That’s particularly true for IRA rules. There are IRA benefits for married couples that are not options for single folks.

1. Spousal Contributions

Generally, to make an IRA contribution, you must have compensation (typically W-2 income or net earnings from self-employment). If you are single and have no compensation, you are out of luck. However, a special rule applies for those who are married. You can use your spouse’s compensation to fund an IRA contribution. This is a great benefit if you are a stay-at-home parent. If your spouse has enough compensation, you and your spouse can each fully fund an IRA for the year. If you are age 50 or over this year, you can each contribute $6,500 to your respective IRAs for 2016.

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3 Roth IRA Five-Year Rules

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By Sarah Brenner, IRA Analyst
Ed Slott and Company, LLC

Understand these 3 Roth IRA Five-Year Rules to maximize your benefits

Roth IRA Five-Year RulesDo you have a Roth IRA or are you thinking about starting one? You may have heard that a “five-year” rule is important for these accounts. Well, that’s just the beginning of the story. There are actually 3 Roth IRA Five-Year Rules. You need to understand each of them to maximize the benefits of your Roth IRA.

• Five-Year Rule for Penalty-Free Distributions of Converted Funds

If you convert your traditional IRA to a Roth IRA, any pre-tax funds in the traditional IRA that you convert are taxable to you in the year of the conversion. No matter what age you are when you convert, the 10% early distribution penalty does not apply. If you then take a distribution of the converted funds from your Roth IRA, that distribution will always be tax-free. This makes sense because you already paid taxes when you converted your Traditional IRA. However, if you are under age 59 ½ and take a distribution within five years of your conversion, your distribution will be subject to the 10% early distribution penalty, unless an exception such as disability applies. This rule was put in place to close a loophole in the rules, where traditional IRA owners, under age 59 ½, would have been able to convert to Roth IRA and then take a Roth IRA distribution to evade the early distribution penalty that would have applied if they took the distribution directly from their traditional IRA.

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Avoiding the 10% IRA Penalty

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What is the 10% IRA penalty?

Tax PenaltyA 10% IRA 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.

Exceptions: Exceptions apply for withdrawals from company retirement plans for individuals who separate from service at age 55 or older, and for withdrawals from governmental defined contribution and defined benefit plans for public safety officials who separate from service at age 50 or older. For SIMPLE IRAs, the penalty is 25% for the first two years in the plan, then reverts back to the 10% penalty in following years.

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3 Questions When Preparing a Power of Attorney for an IRA

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Much consideration should be given when choosing your Power of Attorney.

Giving another person the ability to make significant financial decisions and/or take IRA Power of Attorneyactions on your behalf is not an easy thing to do. That said, various situations may arise where you no longer want to, or are able to, manage your own finances. In such cases, you want to make sure someone else can act on your behalf as Power of Attorney.

Typically, this is done via what’s known as a Power of Attorney (POA) document. This form, which is generally prepared by an estate planning attorney, grants a person – known as your attorney-in-fact (or agent) – the ability to step into your shoes and make what are often critical and important decisions..

Clearly, great thought should be given to whom you name as your attorney-in-fact. All too often though, that’s where the thought stops. In reality, a commensurate level of thought and discussion should take place regarding the document itself and the provisions that are incorporated into your POA.

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What is Your IRA Required Beginning Date?

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What You Need to Know About Your Required Beginning Date (RBD)

Required Beginning DateYour Required Beginning Date (RBD) is the date for beginning to take required minimum distributions (RMDs) from your retirement account if you have an IRA or employer plan.

The rules differ depending on the type of retirement account you have or if you are the account owner or the beneficiary.

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