What is a Roth IRA recharacterization?
In the simplest of terms, a Roth IRA recharacterization is an “undo.” It erases a Roth IRA conversion, and the conversion is treated as if it never occurred.
1. Meet the deadline. A Roth IRA conversion can be recharacterized until October 15 of the year after the calendar year of conversion. That means that either a January 1, 2017 or a December 31, 2017 conversion can be recharacterized through October 15, 2018. If you miss the October 15 deadline, the only way to get an extension is to go for a private letter ruling from the IRS.
No one can argue that the millennial generation faces big challenges when it comes to savings. Younger workers are dealing with record setting student loan debt, high housing costs and stagnant wage growth. It’s hard to save for retirement when you are worried about the next month’s rent. Here are five retirement strategies for younger workers.
1. Start Small
If you are just getting a foot in the workplace then there is nothing wrong with starting small. Time is something that you have on your side. Starting early can make all the difference, even with a very small amount of money.
For twenty-somethings, just starting out in the work place and looking to pay the rent, enjoy life and still save for retirement, there are options out there. Even a small salary deferral to a 401(k) or contribution to an IRA is worth considering. It is a small step in the right direction and it gets you into the saving habit early!
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The cost of education continues to climb. If you have children, you may be concerned about how you can pay for their higher education. You can’t afford to overlook any options that may help you save. One savings tool that is frequently overlooked is the Education Savings Account (ESA).
Here are 15 things you need to know about ESAs.
1. You may establish an ESA with the custodian of your choice. The paperwork is very comparable to the paperwork required to establish an IRA.
2. Contributions to the account go toward the educational expenses of a designated beneficiary of a child under the age of 18. Contributions may be made for designated beneficiaries older than 18 if they have special needs.
It is important to know what your IRA custodian will tell you and what they will not or cannot tell you. The I in IRA stands for individual and many times it is up to the individual to know things or keep track of them.
- 60-Day Rollovers – An IRA custodian will not remind you that an individual can only do one 60-day IRA-to-IRA or Roth IRA-to-Roth IRA rollover in a 12-month period. They may not even tell you that you have 60 days to complete a rollover. IRS has ruled that while a custodian might be held liable for erroneous information, they have no obligation to give the individual any information on rollovers. A distribution that is eligible for rollover is one where the check from the IRA or Roth IRA custodian is made payable to the account owner who then has 60 days to recontribute the funds to either the same or a different IRA/Roth IRA. This type of transaction can only be done once in a 12-month period. IRAs and Roth IRAs are aggregated for the once-per-year rule.
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