Twenty years! That's how long Roth IRAs have been around. In the year 2000 only about $77 billion was invested in these types of accounts but by 2017 it is estimated that there is almost $3 trillion in Roth IRAs. While these accounts have enjoyed explosive growth over two decades, many things are not fully understood about this tax-free retirement account.
Retirement means different things to different people. Some people look at this as the last chapter in a long life. They wish to slow down, travel a bit and spend more time with their families. Other people look at retirement as an opportunity to reshuffle the cards and pursue new dreams or passions that their earlier career did not provide.
Prior to the Tax Cuts and Jobs Act (TCJA), an individual had until the due date (including extensions) to reverse a Roth conversion if it did not make sense, which resulted in a date of October 15 of the year following the conversion. With passage of the TCJA, this recharacterization was eliminated.
Last month, the Internal Revenue Service released Notice 2017-64, which provides the annual cost-of-living adjustments and contribution limits on 401(k) plans, pension plans, and other retirement accounts for 2018.
A Roth IRA can be an attractive investment over a traditional IRA in a couple of different ways: it gives taxpayers the opportunity to avoid tax on their IRA distributions and a Roth is not subject to required minimum distribution rules. When converting a traditional IRA to a Roth IRA, a taxable event occurs and taxpayers must pay tax on their conversion amount as if it were ordinary income.
Inheriting an IRA means different things to different people. Everyone shares in the grief of a departed loved one, but the options available to those beneficiaries are very different. Spousal beneficiaries have options to treat the IRA as their own or can keep the account in the original owner's name. Non-spousal beneficiaries must keep the account in the original owner's name and are subject to different distribution rules that depend on the age of the original owner.
The IRS, with an affirmative ruling from the Tax Court, has disallowed an S corporation's deduction of the unpaid portion of the payroll expenses for employees who participated in the S corporation's employee stock ownership plan (ESOP).
Many years ago you started to put some money aside to provide a comfortable retirement. Maybe it was a pension plan, possibly a 401K plan or even an IRA. Do you have more than one of these accounts because of job or investment advisor changes? Have you gotten married since you opened your account? Have you had children, got divorced, had grandchildren or had a death in the family? Chances are one or more of these life events will apply to you. When you set your retirement account up you made a beneficiary election. Do you remember who you selected...or have a copy of the election you made? Your retirement account is just that, for retirement. However, in most cases these funds are never totally exhausted before the account owner dies so your beneficiary election is vital to proper retirement planning. Your beneficiary election will determine who inherits your retirement account, but more importantly, how and when it will be taxed to them.
If you do not participate in your employer's retirement plan, you have up until April 18, 2017 to make a traditional IRA contribution which would be fully deductible on your 2016 income tax return.
The Internal Revenue Service has announced the cost-of-living adjustments impacting dollar limitations for pension plans and other retirement related items for tax year 2017. While many limits remain unchanged, see below for the 2017 increases.
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