Time is ticking by! Here are important retirement account deadlines you don’t want to miss.
• Recharacterize 2017 Roth IRA Conversions
Did you convert a traditional IRA to a Roth IRA in 2017? If you think you may want to recharacterize your account(s), don’t let October 15 slip by.
If your account has declined in value, a recharacterization might make sense. You may also consider recharacterizing 2017 conversion and reconverting in 2018 to take advantage of lower tax rates put in place by the Tax Cuts and Jobs Act (TCJA).
TCJA eliminates recharacterization for Roth conversions done in 2018 or later. Clients who converted in 2017 are the last ones who will be able to take advantage of this rare opportunity in the tax code. Don’t miss out by missing the deadline!
Understanding the difference between IRA & Designated Beneficiaries
IRAs have beneficiaries and “designated beneficiaries,” and it is important to know the difference. If you wish your heirs to have the opportunity to take full advantage of “stretch” IRAs, and to avoid other possibly costly mistakes, be sure your heirs are designated beneficiaries. Here’s the difference and why it matters.
The beneficiary that inherits an IRA can be an individual or a legal entity such as a charity or an estate. But a designated beneficiary must be a living person ‘with a pulse’ who is named on the beneficiary form of the IRA.
The major advantages of a designated beneficiary are:
Distributions from inherited IRAs can be stretched over a designated beneficiary’s lifetime, possibly allowing decades of tax-favored investment returns to be earned in the IRA.
The IRA passes directly to a designated beneficiary, escaping complications like probate.