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☆ An early retiree explains the IRS rule he uses to withdraw $20,000 a year of his retirement money penalty-free even though he hasn't reached age 59 ½
▼ + stars: | 2024-05-11 | by ( Kathleen Elkins | ) www.businessinsider.com time to read: +7 min

Courtesy of Eric CooperThe idea of early retirement didn't start to percolate until 2019. "That's when I found the Mr. Money Mustache website and this article that explained the simple math behind early retirement and the 4% rule." According to the 4% rule, which helps retirees determine how much they can spend without running out of money, Cooper had a big enough portfolio to stop working. Using Rule 72(t) to access his retirement money without penaltyWhen you contribute to retirement accounts like a 401(k) and IRA, you can start taking penalty-free withdrawals after age 59½. He rolled over $300,000 because that's about how much money he'll need for a $20,000 annual distribution each year until he's 59 ½.

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☆ Saving in a 401(k) can come with unexpected tax bills. Here's what to check right away to avoid a surprise and 4 ways to reduce your taxes as you withdraw.
▼ + stars: | 2024-04-24 | by ( Kathleen Elkins | ) www.businessinsider.com time to read: +8 min

Depending on your tax bracket at the time of withdrawal, your 401(k) money could be taxed at around 20% or 30%. Note that if you have a Roth 401(k), which is funded with after-tax dollars, you won't be taxed when withdrawing. The longer you can wait to touch your 401(k) money, the longer you'll delay owing taxes. Finally, there's the "non-taxable portion," he said, which would be money in accounts like a Roth 401(k), Roth IRA, and HSA. Or do they have a Roth IRA that they can take it from tax-free to benefit them?"

Persons: —, Grant Neiland, there's, you'd, Roth, Neiland, you've Organizations: Service, Business, Carson Wealth, IRS, Roth IRA

☆ Here's what to know before withdrawing funds from inherited individual retirement accounts
▼ + stars: | 2024-04-22 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +1 min

If you've inherited an individual retirement account since 2020, you could have a shorter timeline to withdraw the money, which can trigger tax consequences. But there are a few things to consider before emptying an inherited account, experts say. Under the Secure Act of 2019, so-called "non-eligible designated beneficiaries," have a 10-year window to deplete an inherited IRA. Non-eligible designated beneficiaries are heirs who aren't a spouse, minor child, disabled or chronically ill. Certain trusts may also fall into this category. They just want the money," said individual retirement account expert and certified public accountant Ed Slott.

Persons: you've, RMDs, Ed Slott Organizations: IRS, Finance

☆ IRS waives mandatory withdrawals from certain inherited individual retirement accounts — again
▼ + stars: | 2024-04-19 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +1 min

The IRS has again waived required withdrawals for certain Americans who have inherited retirement accounts since 2020. Before the Secure Act of 2019, heirs could "stretch" retirement account withdrawals over their lifetime, which reduced year-to-year tax liability. Now, certain heirs have a shorter timeline due to changed rules for so-called required minimum distributions, or RMDs. Under the Secure Act, certain heirs must empty inherited accounts by the 10th year after the original account owner's death. The latest penalty relief only applies to certain heirs, known as "non-eligible designated beneficiaries," subject to the 10-year withdrawal rule under the Secure Act.

Persons: Biden, Ed Slott Organizations: IRS, Secure, Finance

Charles Schwab Learn More Minimum deposit and balance Minimum deposit and balance requirements may vary depending on the investment vehicle selected. How are required minimum distributions calculated? Everyone's financial circumstances are different, but there are some strategies that could reduce the tax implications of required minimum distributions. You can also calculate your required minimum distributions using the IRS' life expectancy chart. And if you've already been taking required minimum distributions, don't be surprised if they're larger this year.

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☆ 3 Crucial RMD Questions the IRS Needs to Answer
▼ + stars: | 2023-11-02 | by ( Leonard Sloane | ) www.wsj.com time to read: 1 min

When Congress passed the Secure 2.0 Act in late 2022, retirement savers cheered at a host of changes in rules for required minimum distributions from tax-deferred accounts like IRAs. Some of the changes are straightforward—such as raising the starting age for RMDs to 75 in 2033 from 73 today and 72 last year (and up from 70½ as recently as 2019).

☆ Withdraw funds from inherited accounts now to avoid getting 'buried in taxes' later, IRA expert says
▼ + stars: | 2023-10-27 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +1 min

Elenaval | Room | Getty ImagesIf you inherited an individual retirement account, the IRS waived penalties for some missed mandatory withdrawals this year. But there could be reasons to start taking them anyway, experts say. Prior to the Secure Act of 2019, heirs could "stretch" IRA withdrawals over their lifetime, which minimized year-to-year tax liability. By starting RMDs sooner, heirs can smooth out taxes over a number of years and possibly reduce the overall bill with proper planning, Slott said. Leverage 'pretty attractive' tax rates nowAnother reason to take RMDs sooner may be to leverage the current federal income tax rates, which could be changing in a couple of years.

Persons: Ed Slott, Slott, Ben Smith Organizations: Secure, Financial Locations: Milwaukee

☆ Retirement account withdrawal rules are 'so complicated' for inherited IRAs, expert says. What to know
▼ + stars: | 2023-10-26 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +2 min

But the gift comes with mandatory withdrawals for heirs and following the rules can be difficult, experts say. According to the Secure Act of 2019, certain heirs now have less time to deplete inherited accounts due to a change in so-called "required minimum distributions." But there's now a 10-year withdrawal rule for certain heirs, meaning everything must be withdrawn by the 10th year after the original account owner's death. The rule applies to accounts inherited by so-called "non-eligible designated beneficiaries" on Jan. 1, 2020, or later. Ed Slott IRA expertNon-eligible designated beneficiaries are heirs who aren't a spouse, minor child, disabled, chronically ill or certain trusts.

Persons: Ed Slott, Ashton Lawrence, there's, Slott, RMDs Organizations: Istock, Getty, Secure, Mariner Wealth Advisors, IRS Locations: Greenville , South Carolina

☆ Retirement withdrawal rules are 'crazy' this year, IRA expert says. Here's what you need to know
▼ + stars: | 2023-10-25 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +2 min

"They're crazy," said IRA expert and certified public accountant Ed Slott, describing the new RMD rules. For 2023, RMDs apply to both pretax and Roth 401(k) accounts, along with other workplace plans. Secure 2.0 bumped the RMD beginning age to 73 from 72 for pretax IRA owners and retirement plan participants. If you turn age 72 in 2023, you can delay RMDs until age 73. But if you turned 72 in 2022, you needed to take your 2022 RMD by April 1, 2023, and your 2023 RMD by year-end.

Persons: RMDs, Ed Slott, pretax, Roth, Slott, Ben Smith Organizations: Sdi, Financial Locations: Milwaukee

Here's everything you need to about the up-and-coming changes for 401(k) catch-up contributions. 401(k) catch-up contributions in 2026: 4 things you should know now1. But starting in 2026, older workers earning over $145,000 annually will no longer be able to deposit catch-up contributions into a traditional 401(k) plan. Rather than collecting the immediate tax benefit of a traditional 401(k) contribution, catch-up contributions will be taxed as Roth contributions. You have until 2026 to prepareThe new 401(k) catch-up rules were originally planned to be set into motion on January 1, 2024.

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☆ What Is a Roth IRA and How Does It Work?
▼ + stars: | 2023-08-16 | by ( Tanza Loudenback | ) www.wsj.com time to read: +13 min

How does a Roth IRA work? “A Roth IRA offers investors a lot of flexibility which, in my opinion, is its biggest benefit,” says Eric Presogna, a financial planner in Erie, Pa.How is a Roth IRA different from a traditional IRA and from a 401(k)? The annual limits apply to traditional and Roth IRAs, in aggregate—meaning you can’t add more than the allowed amount to your traditional and Roth IRAs combined. High-income workers can use the “backdoor Roth” strategy to get money into a Roth IRA. How to fund a Roth IRAA Roth IRA typically needs to be funded before you can start choosing investments.

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☆ How Retirement Plans Should Protect Employees From Themselves
▼ + stars: | 2023-08-06 | by ( Ian Ayres | Quinn Curtis | ) www.wsj.com time to read: 1 min

Journal Reports: Investing MonthlyWhat Inheritors of IRAs Need to Know About Required WithdrawalsBy Leonard SloaneA lot of taxpayers were confused, and missed taking RMDs when they should have. Fortunately for them, penalties have been waived.

Persons: Leonard Sloane

"We've got this window of low taxes here," said certified financial planner Dan Galli, owner at Daniel J. Galli & Associates in Norwell, Massachusetts. Former President Donald Trump's signature tax overhaul temporarily shifted individual income tax brackets by reducing the rates and applicable income levels. "It's a fascinating time to look at how you want to blend or sequence your income in retirement," Galli added. If you're 59½ or older, you can start taking withdrawals from pre-tax retirement plans without incurring a penalty. While you'll still owe regular income taxes, those rates may be lower through 2025, he said.

☆ The last chance for some retirees to avoid a 25% tax penalty is April 1
▼ + stars: | 2023-03-17 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +2 min

In 2022, Secure 2.0 raised the age to 73, which starts in 2023. RMDs apply to both pre-tax and Roth 401(k)s and other workplace plans, along with most individual retirement accounts. Secure 2.0 reduced the RMD penaltyIf you skip your RMD or don't take out enough, there's a 25% penalty, levied on the amount you should have withdrawn. Secure 2.0 dropped the penalty to 25% from 50% starting in 2023, with the possibility of reducing it further to 10% if you take your missed RMD during the "correction window." "In the past, the IRS was lenient about missed RMDs, but with the new reduced penalties, they may get more aggressive," he said.

☆ Rollovers from a 401(k) plan to an IRA: Weigh these 7 factors first
▼ + stars: | 2023-02-09 | by ( Greg Iacurci | ) www.cnbc.com time to read: +4 min

Investment funds in 401(k) plans are generally less costly than their IRA counterparts. That's largely because IRA investors are "retail" investors while 401(k) savers often get access to more favorable "institutional" pricing. watch nowOf course, not all 401(k) plans are created equal. For example, more than 30% of 401(k) plans disallow periodic or partial withdrawals by retirees, and about 36% disallow installment payments, according to the Plan Sponsor Council of America, a trade group. Company stockWorkers who own company stock in their 401(k) can get a tax benefit for keeping those holdings in-plan rather than rolling them to an IRA, Jenkin said.

☆ Secure 2.0 changes 3 key rules around required withdrawals from retirement accounts
▼ + stars: | 2023-01-03 | by ( Greg Iacurci | ) www.cnbc.com time to read: +2 min

President Joe Biden signed a $1.7 trillion legislative package on Dec. 29, 2022 that has several updates for retirement savers. Raising the RMD age to 73 (and eventually 75)Currently, savers have to start taking RMDs at age 72. The new law raises the RMD starting age in two tranches: to 73, starting in 2023, and to 75, starting in 2033. Eliminating RMDs from a Roth 401(k)Starting in 2024, investors in employer retirement plans likes Roth 401(k) accounts will no longer have to take RMDs. This change aligns Roth 401(k) with Roth IRAs, which don't require distributions during one's lifetime.

☆ Here's what Secure 2.0 means for you if you're getting close to retirement
▼ + stars: | 2022-12-27 | by ( Sarah O'Brien | ) www.cnbc.com time to read: +4 min

Insta_photos | Istock | Getty ImagesIf you're getting close to retirement age, there are some upcoming changes enacted as part of a government funding bill that may be of interest to you. Catch-up contributions are poised for changesUnder current law, anyone age 50 or older can make "catch-up" contributions to their 401(k) account. Unlike contributions to traditional 401(k) plans, money put in a Roth 401(k) or individual retirement account doesn't get you a tax break, but qualified withdrawals in retirement are tax-free. This Roth requirement means "if you don't have a Roth option in your plan, catch-up contributions wouldn't be allowed," Dickson said. "If their plan allows it, [workers] can elect to have employer matches be designated as Roth contributions," Dickson said.

☆ 'Secure 2.0' clears Congress as part of omnibus appropriations bill, will bring more changes to U.S. retirement system
▼ + stars: | 2022-12-23 | by ( Sarah O'Brien | ) www.cnbc.com time to read: +1 min

Three years after the Secure Act of 2019 ushered in the first major changes to the U.S. retirement system in more than a decade, more modifications are now on their way. Dozens of retirement-related provisions collectively known as "Secure 2.0" are included in a $1.7 trillion omnibus appropriations bill that received approval from the House on Friday — following the Senate's nod on Thursday — and will head to President Joe Biden for his signature. Secure 2.0 "addresses gaps that have left some people on the sidelines of retirement savings, unable to access the workplace retirement plans that do so much good in establishing the capability and habit of savings," said Susan Neely, president and CEO of the American Council of Life Insurers. The Secure 2.0 provisions are intended to build on improvements to the retirement system that were implemented under the 2019 Secure Act. Those changes included giving part-time workers better access to retirement benefits and increasing the age when required minimum distributions, or RMDs, from certain retirement accounts must start — to age 72 from 70½.

☆ 'Secure 2.0' is part of the $1.7 trillion spending bill, putting it on track to usher in retirement system improvements
▼ + stars: | 2022-12-20 | by ( Sarah O'Brien | ) www.cnbc.com time to read: +1 min

Another round of changes to the U.S. retirement system appears to be on its way. A collection of retirement-related provisions known as "Secure 2.0" is included in a 4,100-page, $1.7 trillion spending bill — which would fund the government for the 2023 fiscal year — that was unveiled Monday night. "I don't believe there will be further changes to [Secure 2.0]." More from Personal Finance:How to prevent package theft on your doorstepUsed-car prices are down 3.3% from a year agoThe 10 best metro areas for first-time homebuyersThe Secure 2.0 provisions are intended to build on improvements to the retirement system that were implemented under the 2019 Secure Act. Those changes included giving part-time workers better access to retirement benefits and increasing the age when required minimum distributions, or RMDs, from certain retirement accounts must start — to age 72 from 70½.

☆ This 'wild card' strategy can help retirees with unpaid quarterly taxes before year-end
▼ + stars: | 2022-12-20 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +1 min

If you're retired and skipped your 2022 tax payments, you can still avoid late penalties with an under-the-radar year-end strategy, experts say. Since taxes are due as you receive income, you must withhold levies from earnings or pay quarterly estimated tax payments. You may owe quarterly taxes if you didn't withhold enough from Social Security, pensions or other income. But if you missed paying quarterly taxes, you can correct that mistake through your year-end required minimum distribution, or RMD, which currently begins at age 72. More from Personal Finance:There's still time to reduce your 2022 tax bill with these last-minute moves21% of investors don't think they pay fees.

☆ Santa Claus rallies are a 'meaningful' trend, says financial advisor: What one could mean for investors this year
▼ + stars: | 2022-12-09 | by ( Greg Iacurci | ) www.cnbc.com time to read: +1 min

Santa Claus looks on at the 98th Annual Christmas Tree lighting ceremony at the New York Stock Exchange on Dec. 1, 2021 in New York. If history is a guide, stock investors may be poised to get a gift over the holidays. The trend, known as the "Santa Claus rally," encompasses the last five trading days of the calendar year and the first two of the new year. In the past two decades, the S&P 500 Index — a barometer of U.S. stock performance — has increased by 0.7% a year, on average, over those seven trading days, according to FactSet data. The S&P 500 was positive during those seven days in 15 of the 20 years — or 75% of the time, FactSet found.

☆ 401(k) 'hardship' withdrawals hit record high, Vanguard says — another sign households feel the pinch of inflation
▼ + stars: | 2022-12-08 | by ( Greg Iacurci | ) www.cnbc.com time to read: +6 min

Thomas Barwick | Stone | Getty ImagesThe share of retirement savers who withdrew money from a 401(k) plan to cover a financial hardship hit a record high in October, according to data from Vanguard Group. Nearly 0.5% of workers participating in a 401(k) plan took a new "hardship distribution" in October, according to Vanguard, which tracks 5 million savers. Americans are 'feeling the pinch from inflation'Nearly all 401(k) plans allow workers to take hardship withdrawals, but employers may vary in their rationale for allowing them. Participants can also access 401(k) savings via loans or nonhardship withdrawals. Beyond the apparent acute financial need among households, hardship withdrawals carry negative repercussions.

☆ Taking required minimum distributions? How to reduce the sting of selling in a down market
▼ + stars: | 2022-12-07 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +1 min

The deadline is fast approaching for mandatory retirement plan withdrawals, which may force some retirees to sell assets in a down market. But experts say there may be ways to reduce the negative effects. Required minimum distributions, known as RMDs, are yearly amounts that must be taken from certain retirement accounts, such as 401(k) plans and most individual retirement accounts. Although it's been a rough year for the stock market, there's a steep IRS penalty for missing RMD deadlines — 50% of the amount that should have been withdrawn. As of mid-day Dec. 7, the S&P 500 Index is down more than 17% for 2022, and the Bloomberg U.S.

☆ 'You can control your tax reporting destiny.' 4 key year-end tax moves
▼ + stars: | 2022-12-05 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +3 min

While your tax return isn't due until April, several key deadlines are approaching by year-end, experts say. "You can control your tax reporting destiny," said certified financial planner Jim Guarino, a CPA and managing director at Baker Newman Noyes in Woburn, Massachusetts. Since few Americans itemize deductions, it's harder to claim a tax break for charitable gifts. Time Roth IRA conversions with transfers to a donor-advised fundAnother charitable giving strategy, donor-advised funds, may pair well with a Roth IRA conversion, Guarino said. Donor-advised funds act like a charitable checkbook, allowing investors to "bunch" multiple years of gifts into a single transfer, providing an upfront tax deduction.

☆ How to avoid mistakes with required minimum distributions from your retirement accounts
▼ + stars: | 2022-11-30 | by ( Sarah O'Brien | ) www.cnbc.com time to read: +4 min

Divide your account balance — say it's $100,000 — by that factor and your 2022 RMD for that account would be about $3,650. For 401(k) accounts, RMDs must come from each account that is subject to the withdrawals. However, you can aggregate 403(b) accounts, Slott said. Spouses cannot combine their RMDsCharday Penn | E+ | Getty ImagesMarried couples must view their accounts and RMDs separately from each other. "You're holding the same thing but you've satisfied your RMD," Slott said.

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