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Happy Thanksgiving! We Are Thankful for These 5 IRA Rules

To celebrate  Thanksgiving, let’s change it up and take a few moments to give thanks for   the IRA rules that work well and help us save for our families’ futures.

We are thankful for these five IRA  rules:

 1. The Roth IRA Distribution   Rules: The Roth IRA arrived on the scene   in 1998 and brought with it a whole new way of retirement savings. The Roth  IRA distributions rules allow tax-free distributions of earnings as long as   the distribution is qualified distribution. As an extra bonus for savers, the  ordering rules, which dictate how funds are distributed from a Roth IRA, are  very favorable to the Roth IRA owner, allowing access to contributions  without tax or penalty before any earning are touched. For the past 20 years,  Roth IRAs have been hugely beneficial for those saving for retirement and for   that we say thanks!

 2. The Stretch IRA: The stretch IRA is not a type of IRA. Rather, it is a   strategy that IRA owners can use to continue tax advantaged growth for  generations. A stretch can be achieved by naming a living breathing person on   the IRA beneficiary form, which allows the beneficiary to take required  distributions over their single life expectancy. Special rules apply for  trusts. The stretch IRA is so powerful that its recently been on Congress’s   radar for extinction, but so far attempts to kill it have gone nowhere. Right  now, the stretch IRA still exists, and millions of IRA owners and their   beneficiaries are thankful for that!

 3. Spousal Benefits: Being married has its benefits under that tax code. When  it comes to IRAs, spouses get a bunch of benefits. Non-working spouses can  make spousal contributions to their IRAs to build retirement savings. Spouse  beneficiaries have options not available to non-spouse beneficiaries such as  the ability to do a spousal rollover and continue tax-advantages savings with   the IRA. For these benefits, many stay at home parents, widows, and widowers  are thankful.

 4. Self-Certification: Rollovers have a deadline. A distribution must be rolled over  within 60 days of its receipt by the IRA owner. Missing the deadline means  you have a problem. In the past, IRA owners’ options for fixing this mistake  were time consuming and expensive. The private letter ruling process was  often the only option. All of this changed in recent years with the IRS   announcing a new self-certification process for late rollovers. The  self-certification process can provide relief to many who miss the rollover   deadline and it is immediate and free. Thank you IRS!

 5. Exceptions to the Early   Distribution Penalty: Retirement  accounts are supposed to be for saving for retirement. That is why there is a   10% early distribution penalty that applies to distributions taken before age   59 ½. However, life doesn’t always go as planned and Congress has recognized  that fact. That is why there is now a list of exceptions to the penalty  allowing younger savers access to their retirement funds for such reasons as   higher education, disability, or a first home purchase. For these exceptions,  many retirement account owners who have faced unexpected bills or emergencies  are grateful.

“Ed Slott’s Elite IRA Advisor Group” is solely an indication that the financial advisor has attended training provided by Ed Slott and Company. Ed Slott is not affiliated with Royal Alliance Associates, Inc. Securities and advisory services offered through Royal Alliance Associates, Inc. Member FINRA/SIPC. Additional advisory and financial planning offered through Affiliated Advisors, Inc. Insurance services offered through Eastern Planning Inc. Listed entities not affiliated with Royal Alliance. Eastern Planning and Royal Alliance do not offer tax services. Please consult with a tax professionalfor specific, individualized advice. Reprinted from The Slott Report, 11/19/2018, with permission. Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article. Copyright © 2017 Ed Slott and Company, LLC. By Sarah Brenner, JD

 

 

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