By Sarah Brenner, JD
Director of Retirement Education

Question:

Hello,

Last December 15, I withdrew $10,000 from my traditional IRA.  Thirty days later, I deposited $4,000 in a Roth IRA and $6,000 in a different traditional IRA.  Can I treat the $4,000 Roth IRA deposit as a taxable Roth IRA conversion, and treat the $6,000 traditional IRA deposit as a non-taxable IRA rollover? Or, have I violated the once-per-year IRA rollover rule?

Thank you,

Jeffrey

Answer:

Hi Jeffrey,

There is no problem here with the once-per-year rollover rule. The rule limits you to rolling over one distribution received from your IRAs within a 365-day period. Here you only have one distribution. It does not matter if that distribution is split and rolled over to multiple IRAs. Also, one of your rollovers was a Roth IRA conversion, and the once-per-year rollover rule never applies to Roth IRA conversions.

Question:

I am both the owner and beneficiary of a 529 plan, and my wife is owner and beneficiary of another one. If we have $20,000 in earned income in 2026, what is the total that my wife and I are allowed to roll over from our 529 plans to make contributions to our Roth IRAs?

Thanks,

Mike and Becky

Answer:

Hi Mike and Becky,

The SECURE 2.0 Act allows up to $35,000 total to be moved from a 529 plan to a Roth IRA. The rollover counts towards the annual Roth IRA contribution limit, and you must have earned income to be eligible. However, the Roth IRA contribution income limits do not apply. For 2026, if you have $20,000 in earned income you can each contribute $7,500 ($8,600 if you are age 50 or over) to a Roth IRA from the 529 plan of which you are the beneficiary.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/the-once-per-year-ira-rollover-rule-and-529-to-roth-transfers-todays-slott-report-mailbag/

By Ian Berger, JD
IRA Analyst

Some of you may have come across the term “modified adjusted gross income” (MAGI) and figured it has something to do with “adjusted gross income” (AGI). But, unless you’re a tax geek, that may be all you know.

That’s a shame because when it comes to tax breaks, MAGI is a very important number. It determines eligibility for many federal income tax deductions and exclusions. In the IRA world, MAGI determines eligibility for deductible traditional IRA contributions and eligibility for annual Roth IRA contributions.

So, what exactly is MAGI? MAGI always starts with AGI. AGI is your total income subject to taxes. This includes things like wages, interest and dividends, capital gains, and retirement plan and IRA income. For most people, total income is exactly the same as AGI. But in some cases, total income must be adjusted before you get to AGI. (AGI can be found on line 11a of your Form 1040.)

Often, MAGI will be the same as AGI. But sometimes certain items must be added back, or can be subtracted from AGI to get to MAGI. What’s really confusing is that there isn’t one uniform definition of MAGI in the tax law. Instead, the specific required adjustments to AGI are completely different, depending on the specific tax rule using MAGI. In fact, there are over a dozen different versions of MAGI! (And none of those definitions are reported on your 1040.)

The version of MAGI used for IRA deductibility and for Roth IRA eligibility requires you to add several items to AGI, the most common of which is student loan interest. For Roth IRA eligibility only, you also get to subtract out income generated if you converted an IRA or a pre-tax retirement plan to a Roth IRA in the same year. IRS Publication 590-A includes helpful worksheets for IRA deductibility and Roth IRA eligibility.

Here’s one last point that trips up some people: On your tax return, you can reduce your AGI by either taking a flat dollar amount deduction (the standard deduction) or itemizing deductions. You can further reduce AGI by claiming other deductions, such as those under the One Big Beautiful Bill Act (OBBBA). Reducing AGI by these deductions produces your total taxable income – the amount you owe federal taxes on. But taxable income is a totally different calculation than any definition of MAGI. No matter which MAGI definition is used, MAGI is always determined before the standard deduction or itemized deductions are taken. So, taxable income has nothing to do with any definition of MAGI.

Example: Zoe, age 45 and single, had a total income of $150,000 in 2025. That year, Zoe made $3,000 of health savings account (HSA) contributions directly to the HSA provider (rather than through payroll deduction). She can subtract that $3,000 from total income, bringing her 2025 AGI down to $147,000. Zoe wanted to make a 2025 Roth IRA contribution. The MAGI used for Roth IRA eligibility requires that certain tax items be added back to AGI, but Zoe didn’t have any of those items. So, her MAGI was also $147,000. For 2025, single taxpayers could make a full Roth IRA contribution if MAGI was below $150,000. So, Zoe qualified for a full $7,000 2025 contribution. Meanwhile, in doing her taxes, Zoe elected to use the standard deduction ($15,000) to reduce her AGI from $147,000 to $132,000. That $132,000 was her 2025 taxable income, the amount that she had to pay taxes on. But Zoe’s MAGI of $147,000, used to determine her Roth IRA eligibility, was determined before the $15,000 standard deduction. So, her $132,000 of taxable income had nothing to do with her MAGI of $147,000.

Still confused? A knowledgeable financial advisor or tax professional can help.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

By Sarah Brenner, JD
Director of Retirement Education

If you are under age 59½ and you converted your traditional IRA to a Roth IRA, you will need to watch out for the five-year rule for penalty-free distributions of converted funds. Not understanding how the rule works can result in unexpected penalties when you withdraw your Roth IRA funds. Here are five things you need to know:

1. If you make contributions to your Roth IRA, you can always access those funds tax- and penalty-free. You can also always access your converted funds tax-free – even if you are under age 59½. That makes sense because you already paid the tax bill when you did the conversion. There is no five-year rule to worry about with regard to taxation of converted funds.
2. While converted funds are never taxable when distributed from your Roth IRA, it’s a different story when it comes to the 10% early distribution penalty. If you are under age 59½, you must normally satisfy a five-year holding period on funds that were taxable when converted before you can access those funds penalty-free. However, if you qualify for a penalty exception, such as for disability or higher education expenses, the penalty is waived even if the five-year period hasn’t been met.
3. The five-year holding period will restart for each year a conversion is done and is effective as of January 1 of the year of conversion. If a conversion was done any time in 2026, the five-year holding period for that conversion begins on January 1, 2026. If two more conversions are done in 2027, the five-year rule for both those conversions would start January 1, 2027.
4. The best way to understand this five-year rule for penalty-free distributions of converted funds is to know exactly what it is set up to prevent. When you take a distribution from your traditional IRA and convert it to a Roth IRA, that distribution is taxable but not subject to the 10% early distribution penalty. So, soon after Roth IRAs became law, those looking for tax loopholes started advising traditional IRA owners under 59½ that they could get out of the 10% penalty by doing a conversion. IRA owners could just convert their IRA to a Roth IRA and then, the next day, withdraw funds from the Roth IRA tax- and penalty-free.

   Congress quickly shut this loophole and that is why we have this rule. If the converted funds are not held for at least five years or until age 59½, any withdrawal before that time would be subject to the 10% penalty the account owner would have paid if she had withdrawn from her traditional IRA.

5. Don’t confuse this “conversion five-year rule” with the other five-year rule (the “forever five-year rule”) that also applies to Roth IRAs. The forever five-year rule determines whether distributions of earnings from Roth IRAs are tax-free. That rule works differently from the conversion rule. The forever rule for tax-free distributions always applies no matter what your age is. Also, it begins with your first contribution or conversion to any Roth IRA, and it never restarts even if future contributions or conversions are made.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/five-things-to-know-about-the-five-year-rule-on-converted-roth-funds/

By Sarah Brenner, JD
Director of Retirement Education

Question:

I have a new client who has an old SEP IRA as well as a traditional IRA with funds that were rolled over from his 401(k) plan. Can we combine these two accounts?

Answer:

Yes. These accounts can be combined. A SEP IRA is really just the same as a traditional IRA once the contributions are made. There is no reason to keep these accounts separate.

Question:

I am working with a couple on possible Roth conversions and retirement distribution planning. The husband inherited an IRA from his mother. If the husband passes and the wife inherits this inherited IRA, what are the options available to the surviving spouse on this inherited IRA? Can she do a Roth conversion?

Thanks,

Rick

Answer:

Hi Rick,

A Roth conversion would not be possible in this situation. The IRA was originally inherited by the husband from his mother. The husband is a non-spouse beneficiary, and non-spouse beneficiaries cannot convert inherited IRAs. If the wife inherits this IRA as a successor beneficiary, she would be a non-spouse beneficiary as well because she was not married to the original IRA owner (her husband’s mother). That means conversion is not allowed.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/combining-retirement-accounts-and-roth-conversions-todays-slott-report-mailbag/

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By Andy Ives, CFP®, AIF®
IRA Analyst

It’s been nearly 3½ years, and still no news. No guidance. No updates.

Background: In December 2022, the SECURE 2.0 Act was signed into law. That legislation contained an extensively discussed provision – allowing excess dollars in a 529 college savings plan to be rolled over to a Roth IRA. However, that provision included a number of significant restrictions. For example:

• The maximum lifetime amount that can be rolled over is $35,000.
• Rollovers are subject to the annual Roth IRA contribution limit. So, for example, since the Roth IRA contribution limit in 2026 is $7,500, then no more than $7,500 can be rolled over from a 529 to a Roth IRA in 2026. Consequently, a full $35,000 529-to-Roth IRA rollover would need to be done over several years.
• The 529 beneficiary doing the rollover must have compensation in the year of the rollover at least equal to the amount being rolled over.
• The Roth IRA must be in the name of the 529 beneficiary – not the 529 owner (if different).

And here’s the big sticking point:

• The 529 plan must have been open for at least 15 years.

That rule in and of itself is not too high of a hurdle. The problem is that, here we are 3½ years later, and we still do not know if changing the beneficiary of the 529 account resets the 15-year clock. Will the existing time period applicable to the initial account opening carry over to the new beneficiary? No one on the planet has that information. Accordingly, advisors and custodians alike have been advising clients to leave the 529 beneficiary as-is until confirmation is received as to how the 15 years will be applied. Jumping the gun could result in a decade-and-a-half additional wait time to roll over excess 529 dollars to a Roth IRA.

In the meantime, while we all anxiously refresh our computers every few minutes to see if the IRS has released any 529 beneficiary change updates (sarcasm), it’s important to recognize additional 529-to-Roth rules we know are in effect:

• Rollover amounts cannot include any 529 contributions (or earnings on those contributions) made in the preceding five-year period.
• Any actual Roth IRA (or traditional IRA) contributions made by the 529 beneficiary will count against the permitted annual rollover amount.
• There are no income limits restricting the 529-to-Roth IRA rollover for either the beneficiary or 529 owner.
• The rollover from the 529 plan to the Roth IRA is a nontaxable transaction.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/529-to-roth-still-no-news-on-15-year-clock/

By Andy Ives, CFP®, AIF®
IRA Analyst

QUESTION:

I have a 401(k) plan with a previous employer that is a mix of pre-tax and Roth money. I’m considering a direct rollover of the 401(k) to an IRA. How would that work since it’s a mix of pre-tax and after-tax funds? Would I need to open separate rollover and Roth IRAs?

Thanks,

Greg

ANSWER:

Greg,

If you do not already have any existing IRAs, you will need to open a traditional IRA and a Roth IRA to receive the 401(k) rollover. The pre-tax funds in the 401(k) will be rolled over to the traditional IRA, and the Roth 401(k) dollars will go to the Roth IRA. If you do have existing IRAs (traditional or Roth), the 401(k) dollars can be rolled over to the respective current IRAs. There is no reason to keep the rollover dollars in a different IRA (traditional or Roth) if you don’t want to.

QUESTION:

What options are available for a non-working spouse to contribute to a traditional/Roth IRA, provided her significant other is employed and has compensation?

Respectfully,

Richard

ANSWER:

Richard,

If a married couple files a joint tax return, the spouse with no compensation can make an IRA contribution based on the compensation from the working spouse who has compensation. The same annual contribution limits apply as do the phaseout ranges for Roth IRA eligibility. Other than this being called a “spousal contribution,” there is no difference between a contribution based on one’s own compensation vs. a contribution based on a spouse’s compensation.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/401k-rollovers-and-spousal-contributions-todays-slott-report-mailbag/

By Ian Berger, JD
IRA Analyst

Most of you are probably familiar with the concept of the “required beginning date” (RBD). The RBD is the deadline for taking the first required minimum distribution (RMD) from an IRA or workplace retirement plan. If you’re a traditional IRA owner, your RBD is April 1 of the year following the year you turn age 73 (if born between 1951 and 1959) or age 75 (if born after 1959). If you’re a retirement plan participant, your RBD is usually the same date. However, if you’re still working beyond the year you reach age 73 and you don’t own more than 5% of the sponsoring employer, you can usually delay your RMD until April 1 of the year following the year you eventually retire. This is called the “still-working exception.”

The RBD is also important in applying several other RMD rules. For example, if you’re an IRA beneficiary subject to the 10-year payout rule (a “non-eligible designated beneficiary”), you must take RMDs during years 1-9 of the 10-year period if the IRA owner died on or after his RBD. In addition, if you’re a beneficiary eligible to stretch RMDs over your life expectancy (an “eligible designated beneficiary”), you can instead elect the 10-year rule with no annual RMDs if the IRA owner died before his RBD.

However, although the RBD is often the date that dictates whether an RMD rule applies, it’s not always the deciding factor. For some retirement account rules, your “first RMD year” (usually the year you turn age 73) – not the RBD – is what counts. Here’s one common example that causes lots of confusion: Let’s say you retire in the year you turn age 73. If you want to roll over your 401(k) funds to an IRA in the year of retirement, do you have to take an RMD from the 401(k) before doing the rollover?

Since your RBD isn’t until April 1 of the year after your retirement year, you might think that you shouldn’t have to take an RMD if you do a rollover before that April 1. But this is one of those cases where the “first RMD year” controls – not the RBD. The first funds that are distributed out of the plan in your first RMD year (or any subsequent year) are considered part of the RMD. However, RMDs can never be rolled over. This means that if you want to roll over your 401(k) funds in the year you retire (or after) your age-73 year, you must first take your 401(k) RMD.

What if you don’t take the RMD first and instead roll it over? Then, you have an excess IRA contribution. But that’s usually not a problem. As long as the rolled-over amount, along with earnings or losses attributable to the excess (net income attributable, or “NIA”), are withdrawn from the IRA by October 15 of the year after the year of the rollover, you won’t have to pay a penalty.

One way to avoid having to take a 401(k) RMD in the year of retirement is to delay your rollover into the following year (no later than April 1). But then you’d have to take two RMDs in that following year – the year-of-retirement RMD and the following-year RMD – before rolling over the rest of your funds.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/the-required-beginning-date-vs-first-rmd-year-confusion/

By Sarah Brenner, JD
Director of Retirement Education

On April 30, 2026, President Trump signed an executive order to promote retirement savings for American workers. In its aftermath, we have had a flurry of questions about a new savings option called a “Trump IRA.” This is, as the saying goes, “fake news.”

Here are three things you need to know to separate fact from fiction about the new presidential order and its impact on retirement savings.

1. There is no such thing yet as a “Trump IRA.” The executive order did not create a new tax-advantaged account to save for retirement. The President cannot, in fact, do this on his own. Only Congress can change the tax code and create a new savings vehicle. The President, however, can establish a website, and that is what happened. The executive order calls for the establishment of a website (TrumpIRA.org) by January 1, 2027.

2. The new website (TrumpIRA.org) will promote the Saver’s Match. The Saver’s Match is not a newly created initiative. It was already in the works. It was enacted in 2022 as part of the SECURE 2.0 Act and is effective starting in 2027.

The Saver’s Match will replace the current Saver’s Credit and will provide a federal matching contribution of 50% on the first $2,000 of annual retirement contributions (up to $1,000 annually) for eligible lower-income savers. This match is deposited directly into a 401(k), 403(b), or IRA. For single filers, the Modified Adjusted Gross Income (MAGI) phaseout range is between $20,500 and $35,500. For those who are married filing jointly, the MAGI phaseout range is between $41,000 and $71,000. Unlike the current Saver’s Credit, the Saver’s Match is available even for eligible savers who don’t owe federal income tax.

The executive order also says that the new website will list financial institutions that offer IRAs that will accept the Saver’s Match and meet certain other criteria to enhance retirement savings. The website will allow users to filter and select IRAs based on their cost and quality.

3. The new order has nothing to do with Trump Accounts. Trump Accounts are tax-deferred investment vehicles for children under 18, created under the One Big Beautiful Bill Act of 2025. Contributions to these new investment accounts are scheduled to be available on July 4, 2026. More guidance is expected to be released soon to explain more about how exactly these accounts will work, but the executive order does not do this.

Another factor making things even more confusing is that while a Trump Account is subject to special rules until the year the child reaches age 18, at that point it then becomes a traditional IRA, subject to all the normal IRA rules. So, while the account does change from being a Trump Account to being a regular traditional IRA, there never is a point where it is a “Trump IRA.”

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/new-trump-ira-is-fake-news/

By Andy Ives, CFP®, AIF®
IRA Analyst

We know that Roth conversions are permanent. Recharacterization of a conversion is no longer allowed. Once the conversion is done, there is no going back. However, recharacterization is still available for IRA contributions. A traditional IRA contribution can be recharacterized to a Roth IRA or vice versa. A contribution can be recharacterized for any reason as long as it can be a valid contribution to the other type of IRA. This means that the person must be eligible to contribute to the type of IRA to which the funds are being recharacterized.

Why recharacterize? There are multiple scenarios where recharacterization could be the proper strategy. For example, an individual who contributed to a traditional IRA and later discovered the contribution was not deductible could recharacterize the contribution to a Roth IRA (assuming Roth IRA eligibility). A person who contributed to a Roth IRA not knowing his income for the year will be above the phaseout limits could recharacterize that contribution to a traditional IRA.

To recharacterize a contribution, the IRA custodian will transfer the funds, along with the earnings or losses (“net income attributable” or NIA), from the first IRA to the second. NIA is determined by a special IRS formula, which is the same formula used to determine NIA when removing an excess IRA contribution. The deadline for recharacterization is October 15 of the year following the year for which the original contribution was made. The recharacterized contribution is treated as if it had always been made to the intended IRA.

While this is a tax-free transaction, both IRAs report the transactions to the account owner and the IRS. The first IRA custodian will report the recharacterized amount, plus NIA, as a distribution on Form 1099-R. The second IRA (the receiving IRA) custodian will generate a Form 5498. On the Form 1099-R, both the recharacterized contribution amount and the NIA (i.e., the current fair market value of the recharacterized amount) are reported in Box 1, Gross distribution, with “0” in Box 2a, Taxable amount. The distribution code will be either an “N” or “R.”

From the Instructions for Form 1099-R for 2025 recharacterizations:

“N—Recharacterized IRA contribution made for 2025. Use Code N for a recharacterization of an IRA contribution made for 2025 and recharacterized in 2025 to another type of IRA by a trustee-to-trustee transfer or with the same trustee.”

“R—Recharacterized IRA contribution made for 2024 or a previous year. Use Code R for a recharacterization of an IRA contribution made for 2024 and recharacterized in 2025 to another type of IRA by a trustee-to-trustee transfer or with the same trustee.”

Form 5498 will report the total amount being recharacterized in Box 4, Recharacterized contributions. Note: If an unwanted (or disallowed) Roth IRA contribution is recharacterized to a non-deductible traditional IRA contribution, be sure to file Form 8606 to claim that basis.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/reporting-a-recharacterization-2/

By Ian Berger, JD
IRA Analyst

The SECURE Act completely changed the rules for beneficiary IRA (and workplace retirement plan) required minimum distributions (RMDs). It’s now been more than 6 years since the SECURE Act became law and almost 2 years since the IRS finalized its RMD regulations. Yet there’s still plenty of confusion about how these rules work. To help keep things straight, we present our beneficiary RMD cheat sheet.

Keep in mind that these are the rules for retirement accounts inherited after 2019. Pre-SECURE Act rules applied for accounts inherited before 2020, and those old rules were grandfathered and continue to apply for those accounts. Also note that there are separate rules for successor beneficiaries (beneficiaries of beneficiaries).

Where to Begin

To begin with, we need to answer two questions:

• Did the IRA owner die before or after the required beginning date (RBD) for starting RMDs? The RBD is April 1 of the year following the year the IRA owner reaches age 73 (if born between 1951 and 1959) or age 75 (if born after 1959). A Roth IRA owner is always considered to have died before the RBD.
• What kind of beneficiary do we have? An eligible designated beneficiary (EDB) is a surviving spouse of the IRA owner; a minor child (under age 21) of the owner; a chronically-ill or disabled person; or someone who is not more than 10 years younger than the account owner. A non-eligible designated beneficiary (NEDB) is an individual beneficiary who’s not an EDB. A non-designated beneficiary (NDB) is a beneficiary who’s not a person, such as an estate, a charity or a non-qualified trust.

Rules That Apply When a Traditional IRA Owner Dies BEFORE the RBD OR a Roth IRA Owner Dies at Any Time

EDB (other than a minor child): An EDB other than a minor child can either (1) take annual RMDs over the EDB’s life expectancy, or (2) use the 10-year payment rule. If the 10-year rule is elected, the inherited account must be emptied by December 31 of the 10th year following the year of death, but annual RMDs aren’t required during the 10-year period. A surviving spouse EDB can also do a rollover to the surviving spouse’s own IRA (usually not recommended until age 59½).

EDB (minor child): A minor child EDB can either (1) take annual RMDs until the year the child turns age 30 and then empty the inherited account by the end of the following year, or (2) have the 10-year payment rule apply. If the 10-year rule is elected, the inherited account must be emptied by December 31 of the 10th year following the year of death, but no annual RMDs are required.

NEDB: The 10-year rule applies, but annual RMDs aren’t required.

NDB: The 5-year rule applies. The entire account must be emptied by December 31 of the 5^th year following the year of death, but no annual RMDs are required during the 5-year period.

Rules That Apply When a Traditional IRA Owner Dies ON OR AFTER the RBD

EDB (other than a minor child): An EDB other than a minor child can take annual RMDs over the EDB’s life expectancy. But if the EDB is older than the deceased IRA owner, the EDB can use the deceased person’s longer life expectancy in calculating RMDs. A surviving spouse EDB can also do a rollover to the surviving spouse’s own IRA (usually not recommended until age 59½).

EDB (minor child): A minor child EDB can take annual RMDs until the year the child turns age 30 and must empty the inherited account by the end of the following year.

NEDB: The 10-year rule applies, and annual RMDs are required during the 10-year period (based on the beneficiary’s single life expectancy starting in the year after the year of death).

NDB: Annual RMDs must continue over the deceased IRA owner’s remaining single life expectancy assuming the owner had lived (the “ghost rule”).

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/a-cheat-sheet-for-retirement-account-beneficiary-rmds/

By Sarah Brenner, JD
Director of Retirement Education

Question:

My spouse and I have a combined six-figure required minimum distribution (RMD) from my two IRAs and her smaller IRA. Our CPA suggested that for 2026 we only withdraw 50% of her smaller RMD, and that I should pick up the balance to fulfill her requirement.

I questioned her about this situation. She said that since we are married filing jointly, I should do it. I have some concerns about this approach.

Thank you,

Tom

Answer:

Hi Tom,

You are right to have some concerns. When it comes to RMDs, spouses are not considered together, even if they are married and filing jointly. Aggregation of RMDs with a spouse is not permitted. You must each take your own RMDs.

Question:

An adult son inherited an IRA from his mother in 2016. He has been taking annual RMDs. This year, it will be ten years since he inherited the IRA. Does the SECURE Act require him to empty this inherited IRA in 2026?

Warm regards,

Carolyn Sue

Answer:

Hi Carolyn Sue,

The SECURE Act does impose a 10-year payout rule on most adult children who inherit IRAs from their parents. However, this rule does not apply to accounts inherited prior to 2020 when the SECURE Act was enacted. This IRA was inherited in 2016. Therefore, the 10-year rule does not apply and annual RMDs can continue.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/required-minimum-distributions-and-inherited-iras-prior-to-2020-todays-slott-report-mailbag/

By Sarah Brenner, JD
Director of Retirement Education

The once-per-year IRA rollover rule sounds easy. However, there are many ways to go wrong. One common confusion with this rule occurs when there are multiple distributions or multiple deposits. These two circumstances have very different outcomes.

How the Once-Per-Year Rollover Rule Works

The once-per-year rollover rule says that an IRA owner cannot roll over an IRA distribution that is received within a 365-day period of a prior distribution that was rolled over. Traditional and Roth IRAs are combined for purposes of the once-per-year rule. So, for example, a distribution and subsequent rollover between your Roth IRAs will prevent another rollover of a distribution from your traditional IRA received within one year of the Roth IRA distribution. The bottom line is that an IRA-to-IRA (or Roth IRA-to-Roth IRA) 60-day rollover may not be done if you received a prior distribution within the last year (365 days) that you also rolled over.

The once-per-year rollover rule does NOT apply to rollovers between plans and IRAs or Roth IRA conversions.

One Distribution and Multiple Rollover Deposits

If an IRA owner takes a distribution, she may split the funds and roll them over to multiple IRAs. This could be done on different days and that would not be a problem. Multiple rollover deposits are acceptable for purposes of the once-per-year rollover rule because only one distribution is received even though there is more than one rollover deposit.

Example: Sophie receives a $100,000 distribution from her IRA on June 15. On June 20, Sophie rolls over $75,000 to an IRA. On June 25, she decides to roll over the remaining $25,000 to another IRA. This is not a violation of the once-per-year rollover rule because Sophie received only one distribution. Even though she did two deposits on two different dates to complete her rollover transaction, there are no issues with these transactions.

Multiple Distributions and One Rollover Deposit

If an IRA owner is permitted to take a distribution on one day and roll it over on multiple different days, is the opposite scenario also allowed? Can an IRA owner take multiple distributions on different days and deposit them at one time as one consolidated rollover? The answer is no. Even if all the distributions were taken from the same IRA, this is still not allowed. The reason is that only one distribution is eligible for rollover within a 60-day period.

Example: James takes a $2,000 distribution from his IRA on January 10 and another $30,000 distribution on January 12. His plan is to roll over both distributions on the same day to a new IRA. Unfortunately for James, only one of his IRA distributions is eligible for rollover. This is because the once-per-year rule limits him to rolling over only one distribution within a 365-day period.

Do Direct Transfers Between Your IRAs

Confusion about the impact of multiple deposits or distributions and the once-per-year rollover rule is just one of many reasons why 60-day rollovers should be avoided. If there is no 60-day rollover, then there is no once-per-year rollover rule to worry about. How, then, can you move your retirement funds? The best advice is to directly transfer the funds from one retirement account to another rather than taking a distribution payable to yourself and then rolling it over to another retirement account. You can do as many direct transfers between IRAs annually as you want.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/the-once-per-year-rollover-rule-multiple-deposits-vs-multiple-distributions/

By Andy Ives, CFP®, AIF®
IRA Analyst

Qualified charitable distributions (QCDs) and required minimum distributions (RMDs) are two separate and distinct transactions. Here are some of the basics of each:

QCDs are only available to IRA owners and beneficiaries age 70½ or older. You cannot do a QCD from a 401(k) plan. The QCD limit for 2026 is $111,000. With a QCD, IRA funds are sent directly to a qualifying charity, and no goods or services can be received for the donation. Assuming all the rules are followed, the amount of the QCD is excluded from the IRA owner’s income. And since charities do not pay tax, the result is that no taxes are ever paid on the donated dollars.

RMDs are forced withdrawals from traditional IRAs (and from the pre-tax portion of a company retirement plan). When a person reaches a certain age (currently age 73), IRA RMDs must begin. The purpose of an RMD is to force a taxable distribution from what has been a tax-deferred pot of money. Congress allows IRA owners to shelter funds for decades. At age 73, it is time to pay the piper. Understandably, many IRA owners are not thrilled about forced withdrawals and a potentially elevated tax bill.

However, by combining the QCD and RMD rules, a person can satisfy their RMD, avoid any taxes due, and donate to charity all at the same time.

Where people get sideways with QCDs and RMDs is when it comes to timing. A common saying is, “Do your QCD before your RMD.” The purpose of this phrase is to ensure a person does not miss the opportunity to offset RMD income with a QCD. Once a normal (non-QCD) RMD is taken, that income cannot be offset with a future QCD. There is no such thing as a “prior-year” QCD or a “retroactive” QCD. If a person takes their RMD, those funds will be taxable.

But the “do your QCD before your RMD” axiom is misleading. If the goal is to offset all or a portion of an RMD, then the QCD and RMD are done simultaneously. We do not have two separate distributions. There is a single distribution that counts as both a QCD and RMD.

Example: Mike, age 75, has an IRA RMD of $10,000. If Mike’s RMD is distributed directly to him, then $10,000 will be included in his taxable income. Mike wants to avoid paying any tax on his RMD. So, he requests that his IRA custodian process a $10,000 QCD to Mike’s favorite charity. Upon the IRA custodian sending the check to the charity, Mike has killed two birds with one stone. Simultaneously, a QCD was completed, and Mike’s RMD was satisfied.

As mentioned, once a normal RMD is taken, a later QCD cannot offset the income from that earlier distribution. Yes, a person can do a QCD after satisfying their RMD, but that later QCD will just be an additional distribution over and above what was already distributed. Keep in mind that QCDs are not done “before” an RMD. When offsetting the income of an RMD with a QCD, a lone transaction simultaneously satisfies both the RMD as well as delivering funds to a charity as a QCD.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/the-simultaneous-qcd-rmd-transaction/

By Andy Ives, CFP®, AIF®
IRA Analyst

QUESTION:

When someone under age 59½ uses the “backdoor” method of making Roth IRA contributions, does the 10% penalty apply to subsequent withdrawals if the IRA contribution was non-deductible?

Thank you,

John

ANSWER:

John,

The “backdoor Roth” contribution method involves making a non-deductible contribution to a traditional IRA, and then converting those dollars to a Roth IRA. Backdoor Roth IRA contributions are necessary for anyone with income that exceeds the annual Roth IRA contribution phase-out ranges. If the non-deductible dollars are then withdrawn from the Roth IRA after the conversion, there is no 10% early withdrawal penalty on those specific funds, regardless of a person’s age. However, any earnings on the non-deductible dollars would be subject to the penalty if they are received before the Roth IRA owner turns age 59½ (assuming no exception exists).

QUESTION:

Hello,

I am looking for some direction on how to title a beneficiary IRA. My mother passed away in March of this year at age 94, and my sister and I are 50/50 beneficiaries. The custodian wants to title the account as: “John R. Doe as beneficiary of Jane C. Doe IRA” (implying that Jane has died, rather than explicitly stating the fact). If I recall, the title should include “for the benefit of” and be something like: “Jane C. Doe deceased (3/28/2026) FBO John R. Doe, Beneficiary.” Please provide guidance on the proper title content and format.

Thank you and keep up the great work!

Jim

ANSWER:

Jim,

Sorry for the loss of your mother. As for the “proper” titling of an inherited IRA, there is no universally required method or set format. The deceased IRA owner’s name must remain on the account, and it must be clear that it is an inherited IRA. This is typically accomplished by using the words “beneficiary,” “beneficiary IRA” or “inherited IRA.” Both examples you provided are acceptable, although we prefer a title similar to what you suggested: “Jane C. Doe IRA (deceased 3/28/2026) F/B/O John R. Doe, Beneficiary.”

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/backdoor-roth-iras-and-inherited-iras-todays-slott-report-mailbag/

By Ian Berger, JD
IRA Analyst

Contributions to Trump Accounts, the new tax-deferred savings vehicle for children, can’t be made until July 4, 2026. However, the opportunity to open a Trump Account, either through filing Form 4547 or using a dedicated IRS website, forms.trumpaccounts.gov, has been available for several months.

We have heard several reports that grandparents are establishing Trump Accounts for their grandchildren. While grandparents will be able to make contributions on behalf of grandchildren to Trump Accounts, IRS rules appear to strictly limit the circumstances where they can open up those accounts. Making matters worse, grandparents may be committing perjury without even knowing it when signing Form 4547 or using the website.

The IRS proposed regulations say there can only be one Trump Account per child, and the regulations set out two rules for who can establish those accounts. For grandparents, here’s the way the rules work:

• If the grandchild was born since January 1, 2025, a grandparent can only make an election to claim the $1,000 federal government contribution if the grandchild is a dependent of the grandparent’s. In that case, the grandparent can, at the same time as claiming the $1,000, also make an election to open up a Trump Account.
• In any other situation (for example, if the grandchild was born before January 1, 2025), there is a hierarchy as to who can legally open a Trump Account. A grandparent is last in line after a legal guardian, a parent, and an adult sibling. So, a grandparent can’t legally establish a Trump Account for a grandchild born before 2025 unless there is no legal guardian, parent or adult sibling “available” to do so. But neither the IRS regulations nor the Form 4547 instructions specify what not being “available” means. Does it mean deceased? Not legally responsible? Failing to act within a certain period? Something else?

According to the IRS regulations, by making this election, the grandparent must represent, under penalty of perjury, that he is authorized to open the Trump Account and that“there is no other person with a higher priority available to make the election.”The instructions to Form 4547 have similar language. However, the Form 4547 itself and the website only require a grandparent opening a Trump Account to declare, under penalty of perjury, that he has examined the form and “to the best of my knowledge and belief, it is true, correct, and complete.” There’s nothing on Form 4547 or the website warning the grandparent that, by making the election for a grandchild born before 2025, he is also representing to the IRS that no other person with a higher priority is “available” (whatever that means) to make the election. If it turns out that any of these other people are actually “available,” is the election invalid? Or worse, did the grandparent commit perjury by signing the form or completing the website election?

For these reasons, until we get much-needed guidance from the IRS, grandparents should be very careful before making an election to set up Trump Accounts through either Form 4547 or the IRS website. To reiterate: If the grandchild was born since January 1, 2025, the grandparent cannot make the election to claim the $1,000 federal government contribution and elect to open the Trump Account at the same time, unless the grandchild is a dependent of the grandparent’s. And if the grandchild was born before 2025 and has a parent (or legal guardian or adult sibling), the grandparent is not legally authorized to establish the account.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/grandparents-should-be-very-careful-before-opening-trump-accounts/

By Sarah Brenner, JD
Director of Retirement Education

Spring is here! Now is the time when many people spring-clean their homes. It is an opportunity to get organized, get rid of clutter, and simplify. This year, consider taking the same approach with your retirement savings.

Here are five steps you can take to tidy up your IRA and other retirement accounts this spring.

1. Roll over old employer plans. Things have changed. The era of working at one job for 50 years and getting a pension from that job upon retirement is long gone. Workers change jobs frequently. The result can be multiple retirement accounts. You may have several 401(k) plans still with old employers. Consider rolling 401(k) or other plan assets from old employers to an IRA to consolidate your retirement savings. You might also consider moving funds to your current employer’s plan if it accepts rollovers from other retirement accounts.

2. Consolidate your IRAs. Maybe you have multiple IRAs. While having multiple retirement accounts can sometimes serve a purpose, such as investment diversification, in many cases it can happen by accident. The result is more accounts to keep track of and more paperwork. Why not take the time to tidy up your IRAs?

3. Reevaluate your investments. You may have an IRA that you established years ago. At the time the investment lineup made sense, but does it now? It is always a good idea to reevaluate your investment strategy in terms of current market conditions. Why not tidy up by getting rid of old investments that are no longer working? You might even consider moving your IRA to a different custodian. If you do, keep in mind the best way to move your IRA money is to do a trustee-to-trustee transfer. This avoids all the complications that can come with a 60-day rollover.

4. Review your account information. Your retirement accounts produce a lot of paperwork. Tidy it up! Now is the time to get rid of old records you no longer need. While you’re at it, check the correspondence you are receiving. Is all the information accurate? Mistakes can happen and it is better to discover them sooner rather than later.

5. Update your beneficiary form. When you are tidying up your IRA or other retirement account, do not forget about your beneficiary form. You may have completed this form years ago and not given it another thought. Check it now. Does it still reflect your intent as to who will inherit your retirement assets? Many times, things change over the years. There are divorces, marriages, and births of children and grandchildren. Your beneficiary form should be updated to reflect all these changes.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/5-steps-to-spring-clean-your-ira/

By Ian Berger, JD
IRA Analyst

Question:

Hello,

I’ve run into someone who is retired, age 77, and therefore taking required minimum distributions (RMDs) from his Caterpillar 401(k) plan. He has approximately $5M in Caterpillar stock within the plan. It seems murky as to whether he would be eligible for the net unrealized appreciation (NUA) strategy. I have seen that taking RMDs will likely prevent eligibility for NUA treatment due to the lack of distribution of the entire balance in one taxable year. Any thoughts?

Thanks,

Derek

Answer:

Hi Derek,

Eligibility for the NUA strategy requires a triggering event and a lump sum distribution. A lump sum distribution means that the entire 401(k) account balance must be emptied all in one calendar year. The calendar year must be the same year in which the triggering event occurs or a later calendar year. After hitting a trigger, certain distributions (such as taking an RMD) require the entire remaining account balance to also be taken that same year, or else the trigger is lost and the NUA treatment is no longer available.

This person had a triggering event when he retired, so, if he started RMDs before 2026, then he would have needed to complete the lump sum distribution in that first RMD year. Failing to do that means the NUA strategy cannot be used.

Question:

Can a person, age 73, who is now required to take a traditional IRA RMD, still contribute to a Roth IRA if he is still working and has earned income?

Thank you,

Michael

Answer:

Hi Michael,

Yes, someone can make a Roth IRA contribution as long as he (or, if married, his spouse) has earned income at least as high as the contribution, and he meets the Roth IRA income limits. Taking RMDs from the traditional IRA does not affect eligibility for the Roth IRA contribution. However, the RMDs cannot count as earned income for Roth IRA contribution purposes.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/the-net-unrealized-appreciation-nua-strategy-and-roth-ira-contribution-eligibility-todays-slott-report-mailbag/

By Andy Ives, CFP®, AIF®
IRA Analyst

1. When did the decedent die? The SECURE Act impacts beneficiaries of decedents who died in 2020 or later. Anyone who passed away prior to 2020 falls under the old rules. Prior to the SECURE Act, all living, breathing beneficiaries were able to stretch annual required minimum distributions (RMDs) from their inherited IRA over their single life expectancy. For deaths in 2020 or later, the SECURE Act grandfathered certain beneficiaries under the old rules and introduced a 10-year rule for “non-eligible designated beneficiaries” (NEDBs). The year of death of the IRA owner must be identified so we know which path to take – old rules or new rules.

2. What was the date of birth (DOB) of the decedent? If the beneficiary is an NEDB, we must know the DOB of the decedent. Did he die before or after his required beginning date (RBD)? For IRAs, the RBD is April 1 of the year after the year a person turns age 73. For NEDBs, death before the RBD means no RMDs within the 10-year rule. Death on or after the RBD dictates that the beneficiary must take annual RMDs during the 10-year period.

3. Who (or what) is the beneficiary? Of course, we need to know who the beneficiary is. But is the beneficiary a person or a non-living entity like an estate? A non-living beneficiary means the 5-year rule applies for deaths before the RBD, and the “ghost rule” applies for deaths on or after the RBD. The type of beneficiary decides which direction we go.

4. What is the relationship between the decedent and beneficiary? This question is necessary to determine if the beneficiary is a spouse or a non-spouse. Spouse beneficiaries have a set of options available only to them – like a spousal rollover. Identifying whether the beneficiary is a spouse or not further narrows the path toward the proper payout.

5. What was the DOB of the beneficiary? Knowing the age of the beneficiary is crucial. For example, a spouse beneficiary under age 59½ could elect an inherited IRA to have penalty-free access to the inherited funds, and then do a spousal rollover at age 59½. For non-spouse beneficiaries, identifying the age of the beneficiary is just as important. Is this a minor child of the IRA owner? Is the beneficiary “not more than 10 years younger” than the decedent? Both would qualify the beneficiary as an eligible designated beneficiary (EDB) and allow for annual RMDs over the single life expectancy of that beneficiary (for a minor child, only up to age 31).

6. What type of IRA is this? Whether the IRA being passed to the beneficiary is a Roth or traditional matters. Roth IRA owners are always deemed to die prior to the RBD. That means there are never RMDs within the 10-year rule for Roth IRAs inherited by an NEDB. For non-person beneficiaries of Roth IRAs (like an estate), the 5-year rule will always apply.

By layering these six questions on top of each other, we can identify the applicable beneficiary payout structure. Yes, there are additional clarifying questions to help winnow down the final answer, but without answering these foundational questions, the correct path forward is impossible to determine.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/6-required-questions-to-determine-an-ira-beneficiary-payout-structure/

By Ian Berger, JD
IRA Analyst

Trump Account contributions can be made as early as this July 4. But before making a contribution on behalf of a child, you should understand that the way these contributions are treated under federal tax law may be different than the way they are treated under state law.

As a reminder, four types of Trump Account contributions will be permitted:

(1) A one-time $1,000 federal government contribution for children born between 2025 and 2028;

(2) Individual contributions by parents, grandparents, or anyone else on behalf of a child, up to $5,000 in 2026;

(3) Contributions by employers for teenage employees and dependents of employees; and

(4) Contributions by tax-exempt organizations or any government.

For federal income tax purposes, Trump Account contributions in categories (1), (3) and (4) are considered pre-tax IRA contributions. This means that taxation of those contributions and their earnings can be deferred until distribution. Individual contributions (category (2)) are considered after-tax IRA contributions. Taxation of earnings is deferred until distribution.

But that’s only half the story. There is also the question of how states will tax Trump Account contributions. Nine states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming) don’t have state income tax, so that isn’t an issue if you reside there. And, according to the Tax Foundation, 20 states and the District of Columbia broadly match federal tax law. Those 20 states are: Alabama, Colorado, Connecticut, Delaware, Illinois, Iowa, Kansas, Louisiana, Maryland, Missouri, Montana, Nebraska, New Mexico, New York, North Dakota, Oregon, Rhode Island, Utah, Vermont and West Virginia. Those states will likely tax Trump Account contributions like federal law does.

What about the remaining 21 states? According to a March 2, 2026 story by Julie Z. Weil of The Washington Post, they are handling Trump Account contributions in different ways:

• Three states (Arkansas, Idaho and Virginia) specifically say they will follow federal law.
• Georgia, Indiana and Maine have legislation pending to coordinate state law with federal law. (Although Vermont normally follows federal law, Ms. Weil reports that it also has pending legislation.)
• Three states (Minnesota, Mississippi and North Carolina) say they will take up the issue at a later date.
• Seven states (California, Hawaii, Kentucky, Massachusetts, Pennsylvania, South Carolina and Wisconsin) say they won’t recognize the federal tax treatment of Trump Accounts. In other words, they won’t treat Trump Accounts as IRAs. This means that earnings on all types of contributions will be taxed annually. (In California and possibly others of the seven states, contributions from employers and tax-exempt organizations will be taxed in the year made.)
• The remaining states did not respond to Ms. Weil.

If you live in one of the undecided states or a state that didn’t respond to the reporter, you should check with your state tax office.

Just because a state has said it won’t follow the federal tax treatment of Trump Account contributions doesn’t necessarily mean that a contribution is unwise. It just adds another factor that you must consider before pulling the trigger. Seeking help from a competent financial advisor is highly recommended.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/how-will-states-tax-trump-account-contributions/

By Sarah Brenner, JD
Director of Retirement Education

QUESTION:

Hi,

I was wondering if my Roth account that is a part of my Thrift Savings Plan (TSP) through federal employment counts toward my five-year rule for a Roth IRA? If I wanted to transfer the money from my workplace Roth account to a Roth IRA outside of my employment. Does the clock for the five-year rule start with my workplace Roth or with the Roth IRA I open separately?

Thank you!

Judy

ANSWER:

Hi Judy,

This is a good question and one we hear frequently. When it comes to tax-free distributions of qualified earnings, the Roth IRA will have its own five-year holding period. You do not get credit for the time the Roth plan account has been open. Instead, the clock for tax-free earnings starts with your first contribution or conversion to a Roth IRA. If you are looking to roll over the funds from your TSP to a Roth IRA, you may benefit by getting a jump-start on the five-year clock by doing a conversion or Roth IRA contribution as soon as you can.

QUESTION:

Hello!

I reached age 73 on February 9, 2026. I am still working and have a current 401(k) account. I don’t intend to retire, but plan to work for a couple of years, until I reach age 75.

I have a traditional IRA account. To avoid taking required minimum distributions (RMDs) from the IRA account, I am considering rolling over that account to my 401(k) account. Please let me know if I can do it and avoid RMDs. If that is fine, what is the deadline for the rollover from IRA to 401(k) plan?

Jay

ANSWER:

Hi Jay,

The rules do allow rollovers of pre-tax funds to employer plans. The rules also allow a delay for RMDs on funds in an employer plan if the “still-working” exception is available. There is no deadline for doing this rollover. However, because you reach age 73 in 2026, you must take your RMD for 2026 from your IRA prior to the rollover. The RMD is not eligible for rollover to the plan.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/the-five-year-rule-and-rollovers-to-employer-plans-todays-slott-report-mailbag/

By Sarah Brenner, JD
Director of Retirement Education

Not all funds in an IRA belong there. When a contribution is not permitted in an IRA, it is considered an excess contribution and needs to be fixed to avoid penalties. Some excess contributions are easy to understand. Others may surprise you.

Here are some ways an excess IRA contribution can happen to you:

Your income is too high to make a Roth IRA contribution.

A common cause of excess Roth IRA contributions is contributing in a year when income is too high. If your income fluctuates or you have unexpected income in the year, you are particularly vulnerable. Watch out for the annual income limits. For traditional IRAs, there are no income limits for eligibility to contribute, so this is never a problem.

You do not have enough earned income or taxable compensation.

A more frequent occurrence is an IRA owner not having sufficient earned income or taxable compensation to fund an IRA contribution for the year. While you can use a spouse’s taxable compensation to fund your IRA, a multitude of different income sources do not qualify for an IRA contribution, including Social Security, rental income and investment income. You may have a high income, but still not be eligible to fund an IRA. If you go ahead anyway, the result is an excess IRA contribution.

You contribute more than the annual limit.

If you contribute more than the annual limit to an IRA for the year, that will be an excess contribution. This may seem like an easy rule to follow. You may wonder who is going around contributing tens of thousands of dollars to IRAs in violation of the contribution limits. In fact, most IRA custodians will not accept contributions over the yearly limit. However, an individual with multiple IRAs with different custodians could exceed the limit by contributing to each of them.

You violate the 60-day or once-per-year rollover rule.

You may be surprised to know that a failed rollover attempt can result in an excess contribution. How can this happen? Well, there are a variety of ways you can end up in this position. One possibility would be a violation of one of the rollover rules. If you mistakenly roll over after the 60-day rollover period has already expired, or if you violate the once-per-year rollover rule, you will end up with an excess contribution instead of a rollover in your IRA.

You roll over your RMD.

If you are older, you may be at greater risk of excess contribution due to rollover mistakes. Older clients can be at a higher risk for excess contributions due to rollover mistakes. This is because of the rule that says that the required minimum distribution (RMD) for the year cannot be rolled over. In fact, the RMD for the IRA must be taken before any of the funds in the IRA are eligible for rollover. For example, an RMD must be taken before doing a Roth IRA conversion. If you mistakenly roll over your RMD, you will end up with an excess contribution.

You make a contribution to an inherited IRA.

If you inherit an IRA from someone who is not your spouse, you may not contribute to that inherited IRA or combine it with your own IRA. If you do, you will have an excess contribution.

The Fix for Excess Contributions

Now you know what can cause excess IRA contributions. That is the first step in avoiding them. If, despite your best efforts, an excess contribution occurs, the bad news is that the problem will not go away or fix itself. An excess contribution can be subject to penalties each year it remains in the IRA. The good news is that excess contributions can be corrected and often without penalty. For the right fix for your situation, be sure to talk to a knowledgeable tax or financial advisor.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/how-an-excess-ira-contribution-can-happen-to-you/

By Andy Ives, CFP®, AIF®
IRA Analyst

April 15 is fast approaching. Not only is this the standard tax filing deadline, but it is also the deadline to complete some IRA transactions. But there is a common misconception that certain other IRA transactions can also be done up until mid-April. Such is not the case. Here are a few IRA moves that can be done by April 15, and a few that are already well past their deadline.

Prior-year traditional IRA contributions CAN be made up until April 15. So, if an IRA owner still wants to make a 2025 traditional IRA contribution, there is still time (as of this publication date). Prior-year contributions can be deductible or not. But be forewarned, even if a taxpayer files for an extension to submit his return, that extension does not extend the IRA contribution deadline. It remains April 15.

Prior-year Roth IRA contributions CAN ALSO be made up to April 15. The same extension rules mentioned above apply to Roth IRAs as well. But not all benefits are the same. For example, Roth IRAs have 5-year clocks to consider for tax-free earnings. No such clocks apply to traditional IRAs. A person who opens his very first Roth IRA (via either contribution or conversion) will receive a January 1 start date of that year for his “5-year forever” clock. What if a person who never had a Roth IRA before makes a prior-year Roth IRA contribution in early 2026 for 2025? Since the contribution was for 2025, that person receives a January 1, 2025 start date. A prior-year contribution can shave over 15 months off an initial 5-year Roth IRA clock.

What CANNOT be done up to April 15 is a “prior-year Roth IRA conversion.” There is no such thing. All Roth IRA conversions count for the year of the conversion. For a conversion to be applicable for the 2025 tax return, the dollars must have left the traditional IRA by December 31, 2025. So, a person can make a prior-year (2025) traditional IRA contribution, but if those contributory dollars are then promptly converted, the conversion will count for 2026. This is an important distinction when a person is completing a “backdoor Roth IRA” by making a non-deductible traditional IRA contribution and then converting it.

Example: On April 15, John, age 55, makes a prior-year (2025) traditional IRA contribution for $8,000 and, at the same time, makes a current year (2026) traditional IRA contribution for $8,600. John then converts all $16,600 to a Roth IRA. While the $8,000 contribution will count for 2025, the entire $16,600 conversion is documented and taxed on his 2026 return.

Another transaction that CANNOT be extended to the following year is a qualified charitable distribution (QCD). Like Roth conversions, there is also no such thing as a “prior-year” or “retroactive” QCD. When executed properly by an eligible traditional IRA owner, a QCD can exclude income that would otherwise be taxable if a person just took a normal distribution. However, once a standard withdrawal is paid out to a traditional IRA owner, the deed is done. Yes, you can subsequently give that money to charity, but you cannot claim “QCD.” A charitable deduction could work, but the opportunity to offset that income with a QCD is lost. If the goal was to exclude income in 2025 with a QCD, that QCD must have been processed by December 31, 2025.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/april-15-the-deadline-for-some-ira-transaction-but-not-all/

By Andy Ives, CFP®, AIF®

By Ian Berger, JD
IRA Analyst

“Qualified domestic relations orders” (QDROs) are court orders used to divide ERISA retirement plan assets after a divorce. Normally, after a QDRO is approved by a defined contribution plan like a 401(k), the plan will establish a separate account within the plan in the name of the ex-spouse.

Since the ex-spouse has her own separate account within the plan, you might think that required minimum distributions (RMDs) for her would be based on her age. In other words, you might think that the ex-spouse doesn’t have to start RMDs until the year she turns age 73 (or 75 if born after 1959) – regardless of the 401(k) participant’s age.

Strangely, that’s not what the IRS regulations say. Those rules say that, even though an ex-spouse has a separate account, she must start taking RMDs when the participant reaches age 73 (or 75). The IRS rules go on to say that when RMDs start for the ex-spouse, she gets to use her own single life expectancy factor to calculate RMDs. Unfortunately, it’s not clear which IRS life expectancy table should be used. Although it would seem that the more favorable Uniform Lifetime Table (usually used for lifetime RMDs) is the correct table, some large plan administrators base RMDs on the Single Life Table (usually used only for post-death RMDs).

Example: Harrison is a participant in a 401(k) plan. He and his wife, Calista, are divorced in 2026 when Harrison is 72 and Calista is 54. They agree to a QDRO in which Harrison assigns 50% of his 401(k) account balance to Calista. The plan establishes a separate account for Calista’s benefit. Harrison turns age 73 in 2027. Even though Calista will only turn age 55 in 2027, she must start taking RMDs for that year. Her RMD for 2027 would be based on a life expectancy factor of 31.6 if she uses the IRS Single Life Table, but would be 43.6 if she uses the Uniform Lifetime Table.

There is a workaround if an ex-spouse who is younger than her ex-spouse, doesn’t want to be saddled with RMDs. Most plans allow ex-spouses to roll over their separate account to their own IRA at any time. Once she does that, the ex-spouse won’t be required to start RMDs until she turns age 73 (or 75 if born after 1959). (However, if the ex-spouse does the rollover in a year in which she is subject to RMDs, she would have to take the RMD out first.)

A distribution out of a QDRO separate account is neversubject to the 10% early distribution penalty, regardless of age. The downside to the rollover strategy is that the rolled-over funds become subject to the standard IRA early distribution rules. Therefore, if the ex-spouse must tap into the rolled-over IRA funds before age 59½, that withdrawal is subject to penalty.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/the-strange-rmd-rules-for-ex-spouses-after-a-divorce/

By Sarah Brenner, JD
Director of Retirement Education

The tax-filing deadline is almost here. Are you thinking about making a 2025 IRA (traditional or Roth) contribution? Time is quickly running out. Here are some last-minute tips to keep in mind as you make your IRA contribution.

1. Watch the Deadline. The deadline for making your 2025 IRA contribution is the tax-filing deadline, Wednesday, April 15, 2026. Do you have an extension? That won’t buy you more time. Even if you have an extension for filing your 2025 federal income taxes, your deadline for making a traditional or Roth IRA contribution is still April 15, 2026.

• Know Your Limits. The maximum contribution that you can make to an IRA for 2025 if you were under 50 is $7,000. If you reached age 50 (or older) in 2025, the maximum contribution limit is $8,000. The annual limit is aggregated for traditional and Roth IRAs. You cannot contribute $7,000 to your traditional IRA and $7,000 to your Roth IRA for 2025.

• Have Taxable Compensation. Your IRA contribution generally may not exceed your taxable compensation (or earned income) for 2025. However, if you are married, you may be able to use your spouse’s compensation or earned income to make your IRA contribution.

• Check Your Income. When your modified adjusted gross income (MAGI) exceeds $150,000, if you are single, or $236,000, if you are married filing jointly, your ability to contribute to a Roth IRA begins to be phased out for 2025. There are no income limits for traditional IRA contributions.

• Maximize Your Benefits. Many people miss out on the benefits of IRA contributions simply because they do not understand the rules. This is particularly true when it comes to how participation in a company plan affects your IRA contribution.

Here is some good news: Your participation in your company plan does not affect your eligibility to make a Roth IRA contribution at all! More good news: If you and your spouse, if married, are not active participants in a company plan, you can fully deduct your traditional IRA contribution, regardless of how high your income is. However, if you are an active participant in your company’s retirement plan, and your MAGI exceeds $79,000 if you are single, or $126,000 if married, your ability to deduct your 2025 traditional IRA contribution begins to phase out. If you are not an active participant, but your spouse is, your ability to deduct phases out when MAGI reaches $236,000.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/five-last-minute-tips-for-2025-ira-contributions/

By Ian Berger, JD
IRA Analyst

Question:

I had my IRA custodian send my required minimum distribution (RMD) from my IRA to our church, but had 20% federal taxes withheld. Subsequently, I received two Form 1099-Rs from the custodian. One showed the withheld amount as a taxable amount and had a “7” code. The second showed the balance and had a “7Y” code. Then, when doing my taxes, the tax software also says that the amount withheld is taxable. Is there any way to correct this? Please help.

Bernie

Answer:

Hi Bernie,

You did a qualified charitable distribution (QCD), which is a direct transfer from a tax-free IRA to a charity. (A QCD can be used to offset an RMD for a year if the QCD is done first during the year.) Since QCDs are tax-free, you should not have had taxes withheld. Since the taxes withheld went to the IRS and not to your church, that amount was not a QCD and is therefore taxable to you. That explains why the custodian reported the withheld amount as taxable on the first Form 1099-R. The custodian properly used Code “7Y” for the balance on the second Form 1099-R, since the balance was a tax-free QCD. The mistake of withholding on the QCD cannot be corrected, but you can take a credit for the withholding on your tax return.

Question:

If you’re under age 59½, do a Roth conversion, and withhold from the conversion, are you subject to a 10% early distribution penalty?

Best,

Nick

Answer:

Hi Nick,

Normally, you are not subject to the 10% penalty if you do a conversion before age 59½. However, you will have to pay the penalty on any taxes withheld. That’s because the withheld amounts are not being converted and are considered a standard withdrawal that is being sent to the IRS. This is why we advise paying the taxes on a Roth IRA conversion with other, nonqualified assets – like money from your checking account.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/tax-withholding-from-a-qualified-charitable-distribution-qcd-and-from-a-roth-conversion-todays-slott-report-mailbag/

By Andy Ives, CFP®, AIF®
IRA Analyst

Today is April 1, and that’s a big day! No, not because it’s April Fool’s Day, but because today is the required beginning date (RBD) for any traditional IRA owner who turned age 73 in 2025. Based on census data, that could be a few million Americans.

What is the RBD? It is the day when required minimum distributions (RMDs) are officially “turned on” within a traditional IRA. Regarding the RBD on company plans, older employees who do not own more than 5% of the business and whose workplace retirement plan offers the still-working exception can delay the RBD on that plan until April 1 of the year after the year of separation from service. As for Roth IRAs, they never have lifetime RMDs, so all Roth IRA owners are deemed to die prior to their RBD – even if they live to be 100. For this article, we will focus solely on the age 73 traditional IRA RBD.

For any IRA owner who turned age 73 in 2025, their first RMD is for 2025. This first RMD is taken in anticipation of reaching the RBD. The 2025 RMD is calculated by dividing the prior year-end balance (December 31, 2024) by the appropriate life expectancy factor. Most IRA owners will use the Uniform Lifetime Table to identify their applicable factor. For a 73-year-old, that factor is 26.5.

Example 1: Jim turned age 73 in 2025. His IRA balance on December 31, 2024, was $875,000. Jim divides $875,000 by 26.5 and correctly determines his 2025 RMD to be $33,019. Jim must take his first RMD by April 1, 2026.

A traditional IRA owner is only allowed to delay his very first RMD until April 1 of the following year. This grace period allows those who are new to RMDs a few extra months to get into a rhythm of taking annual mandatory distributions. If the first RMD is delayed to the following year, that does not change the original calculation amount. Also, if the first RMD is delayed, the IRA owner will ultimately have to take two RMDs that next year – the delayed first RMD, and the second RMD by December 31 of that same year.

Example 2: If Jim (from Example 1) delayed his 2025 RMD to the first part of 2026, he will have two RMDs to take in 2026 – the delayed 2025 RMD (by April 1) and his 2026 RMD (by December 31). Note that Jim will use his full IRA balance on December 31, 2025 to calculate his 2026 RMD. He does not get to reduce the balance by the delayed 2025 RMD amount.

The RBD is also important for determining the payout structure for IRA beneficiaries. If an IRA owner dies before his RBD, then there are no RMDs within the 10-year period for a non-eligible designated beneficiary (NEDB). Had death been on or after the RBD, then RMDs would apply in years 1-9 of that window. For non-designated (non-person) beneficiaries (NDBs – like an estate), death before or on/after the RBD is the difference between the 5-year rule and the “ghost” rule.

April 1 is not just for pranks. Missing an RMD could result in a substantial penalty. When it comes to lifetime RMDs and beneficiary payout rules, the RBD is nothing to joke about.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/no-joke-today-is-a-required-beginning-date/

Ian Berger, JD
IRA Analyst

More and more Americans are taking on “side gigs” or switching jobs. When that happens, they often wind up participating in two different employer retirement plans at the same time or in the same year. Here are 8 rules to help you understand how the plan contribution limits apply in those cases:

1. There are two different plan contribution limits – the “deferral limit” and the “overall limit.”
2. For 2026, the regular deferral limit for combined pre-tax and Roth contributions is $24,500. However, two catch-up contributions are available. If you’re age 50 or older by the end of the year, you can defer up to an additional $8,000, for a total of $32,500. And if you’re age 60–63 by year end, you can defer up to an additional $11,250, for a total of $35,750.
3. Non-Roth after-tax contributions, if allowed by the plan, do not count toward the annual deferral limit. (But they do count toward the overall limit, discussed later.)
4. The deferral limit is a per-employee limit. It’s based on the total pre-tax and Roth contributions you make to all your plans in one calendar year. Contributions to all plans are aggregated even if the plans are sponsored by companies that aren’t related under the tax rules.

   Example 1: Mira, age 48, participates in a company 401(k) plan through her regular job with Alpha Solutions and also has a solo 401(k) through a computer repair side business. Alpha and her side business are not related entities. By October 2026, Mira has contributed $20,500 of Roth elective deferrals to Alpha’s 401(k) and $4,000 of pre-tax deferrals to her solo 401(k). Even though the companies aren’t related, Mira can’t make any additional deferrals to either plan because her combined 2026 deferral total has already reached the $24,500 limit.

5. There’s one instance where contributions to all plans are not aggregated: If you’re eligible for both a 457(b) plan and either a 401(k) or a 403(b) plan, you can defer up to the maximum limit to each plan.
6. For 2026, the overall limit (also known as the “annual additions limit” or “415 limit”) is $72,000, or higher if you make catch-up contributions.
7. The overall limit sets the maximum amount of all contributions that can be allocated to your plan account in any year. This includes pre-tax and Roth elective deferrals, after-tax employee contributions, employer contributions, and forfeitures.
8. Normally, the overall limit applies on a per-plan basis. However, if your company has more than one plan, contributions to all plans are combined for the overall limit. That’s also the case for contributions to separate plans sponsored by two or more companies that are related under the tax rules. But, if you’re in two plans sponsored by unrelated companies, you get the benefit of a separate overall limit for each plan.

   Example 2: Alpha Solutions and Mira’s computer business (from Example 1) are considered unrelated businesses. So, for 2026, Mira has a separate overall limit for each 401(k) plan and could theoretically have a total of $144,000 ($72,000 x 2) of combined contributions made between the two plans. However, to achieve that result, she would have to make a large amount of after-tax employee contributions and/or receive a large amount of employer contributions. In any case, Mira’s total combined 2026 pre-tax and Roth elective deferrals between the two plans is still capped at $24,500.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/8-rules-to-help-navigate-the-multiple-plan-contribution-limits/

By Sarah Brenner, JD
Director of Retirement Education

Question:

Hi Ed and team,

If a parent, age 86, inherited their son’s 401(k) after the son passed at age 58, does the parent still have 10 years to withdraw the funds? A lot is discussed about beneficiaries younger than the deceased, but not really beneficiaries that are older.

Thanks!

Janet

Answer:

Hi Janet,

Under the SECURE Act, a beneficiary who is “not more than ten years younger” than the deceased is considered an eligible designated beneficiary (EDB) and can still use the stretch. A beneficiary who is older than the account owner would fit into this category of EDB. If the IRA owner died before required minimum distributions (RMDs) would have had to start, the 10-year rule would also be an option.

In this situation, the parent beneficiary could therefore choose to use the stretch and take annual RMDs over their life expectancy, or use the 10-year rule with no annual RMDs. In this case, going with the 10-year rule may be the better option because the beneficiary is age 86, and their life expectancy would be less than ten years. Additionally, because the account owner was only age 58, no annual RMDs would be required during the 10-year period, which would allow more flexibility in distribution planning.

Question:

Hello!

Can a Roth conversion happen in April for the prior year? For example, could I convert my IRA in April of 2026 and consider it a prior-year conversion for 2025?

As always, thank you!

Calvin

Answer:

Hi Calvin,

While prior-year Roth IRA contributions are permitted, prior-year conversions are not allowed. A conversion done in April of 2026 would be taxable for 2026. For the conversion to be taxable for 2025, it would have to have been done by December 31, 2025.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/eligible-designated-beneficiaries-and-roth-conversions-todays-slott-report-mailbag/

By Sarah Brenner, JD
Director of Retirement Education

Here at the Slott Report, we get a lot of questions on all sorts of different IRA topics. However, one area where we consistently get the most inquiries is the five-year rules for Roth IRA distributions.

Here are 5 things every Roth IRA owner needs to know about the five-year rules.

1. Yes, there are two five-year rules. One thing that makes the Roth IRA distribution rules so confusing is the fact that there are actually two five-year rules you need to understand to properly execute tax- and penalty-free Roth IRA distributions. One five-year rule applies for tax-free distributions of earnings, and another applies for penalty-free distributions of converted funds.

2. The five-year rule for tax-free distributions of earnings starts with your first Roth IRA conversion or contribution and it never restarts. This rule applies in the aggregate to all your Roth IRAs. It also is not necessarily five full years. For example, if you make a prior-year Roth IRA contribution in March of 2026 for 2025, your five-year clock for tax-free distributions of Roth IRA earnings starts January 1, 2025.

3. The five-year rule for penalty-free distributions of converted funds applies separately for each conversion. While a distribution of converted funds is never taxable, the 10% early distribution penalty can apply if a five-year holding period is not satisfied. This five-year rule is only an issue if you are under age 59½. It applies separately to each conversion that you do. It also may not be five full years. For example, if you convert on December 31, 2025, you can take penalty-free distributions on January 1, 2030.

4. Beneficiaries are subject to the five-year holding period for tax-free distributions of Roth IRA earnings. If a Roth IRA owner has not satisfied this five-year rule, the beneficiary must finish it out. A spouse beneficiary can use the more favorable of their own or their deceased spouse’s five-year holding period. The five-year rule for penalty-free distributions of converted funds is never an issue for beneficiaries because all IRA distributions due to death are penalty-free.

5. The Roth IRA owner must track the five-year rules. Ultimately, it is up to the Roth IRA owner to keep good records and ensure that they are not violating either of the Roth IRA five-year rules. The taxation of Roth IRA distributions is determined in the aggregate, with all of an individual’s Roth IRAs being considered and ordering rules applied. Contributions come out first, then conversions, and finally earnings. Custodians do not necessarily have all the information to determine if the Roth five-year rules are satisfied. Roth IRA owners must understand the rules. A knowledgeable advisor can help.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/5-things-you-need-to-know-about-the-roth-ira-five-year-rules/

By Andy Ives, CFP®, AIF®
IRA Analyst

When an IRA owner reaches the required beginning date (RBD), required minimum distributions (RMDs) are officially “turned on.” For IRAs, the RBD is April 1 of the year after the year the IRA owner turns age 73. If an IRA owner died after reaching his RBD, then the year-of-death RMD must be considered by the beneficiary.

If an IRA owner dies prior to taking all or a portion of the year-of-death RMD, the responsibility to take whatever remains of that final RMD falls to the beneficiary. For non-spouse beneficiaries, the custodian will typically (but not always) open an inherited IRA, transfer the entire balance into the new account, and the beneficiary can then take the year-of-death RMD from this inherited IRA. As long as the year-of-death RMD is taken by December 31 of the year after the year of death, then the IRS will be satisfied. This process works well because the Form 1099-R reporting the distribution is generated from the beneficiary’s inherited IRA and includes all the appropriate taxpayer information.

The same process also applies to spouse beneficiaries, whether the surviving spouse elects to maintain an inherited IRA or do a spousal rollover. All funds are moved to the surviving spouse’s account, and then the surviving spouse takes the year-of-death RMD. Younger spouses (under age 59½) are encouraged to do inherited IRAs so as to have full access to the funds with no penalty. Upon turning 59½, the surviving spouse can then complete a spousal rollover, thereby consolidating the inherited IRA dollars into their own IRA.

An interesting scenario involving a year-of-death RMD and surviving spouses came across our desk recently. A husband died in January 2026 at the age of 75. His surviving spouse had just turned 59. The husband was beyond his RBD and was taking RMDs, but had yet to take any of his 2026 RMD. As such, that responsibility fell to the beneficiary – his wife.

As mentioned, custodians will typically transfer all the assets from the deceased IRA owner’s account to the beneficiary, and then the year-of-death RMD can be paid out from the inherited account. But in this case, there was an extra layer of rules to consider. The surviving spouse wanted to do a spousal rollover because she was turning 59½ later this year. She had no need to do an inherited IRA first. However, if we processed a spousal rollover, and if the surviving spouse then took the year-of-death RMD before turning 59½, a 10% early distribution penalty would apply. (After a spousal rollover, the inherited assets are treated as if the surviving spouse owned those funds from the very beginning, and all the normal distribution rules apply.)

One option was to hold off on the spousal rollover until later in 2026 when the surviving spouse would be 59½. Another option was to do the spousal rollover now and wait until the surviving spouse was 59½ to take the year-of-death RMD. Another option was to open an inherited IRA, take the year-of-death RMD from that account, and then complete the spousal rollover. In the end, that was the decision that was made. The advisor in charge of this account did a nice job of looking before she leapt into an irreversible transaction like a spousal rollover. A 10% penalty on a year-of-death RMD would have been a tough pill to swallow.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/young-spouse-spousal-rollover-year-of-death-rmdand-a-penalty/

By Andy Ives, CFP®, AIF®
IRA Analyst

QUESTION:

I’m age 72 and my wife is age 63. I want to open a spousal Roth IRA. I already have a Roth for myself that I’ve owned for more than 5 years. Would she have to wait 5 years before she can make a withdrawal without a penalty, or does she have to have it for 5 years before she can withdraw anything?

Thank you,

Hass

ANSWER:

Hass,

If one spouse has little to no income but the other spouse does, the spouse with no income can make a traditional or Roth IRA contribution based on the income of the spouse who has eligible earnings (assuming they file a joint tax return). This is called a “spousal IRA” or a “spousal contribution.” This spousal IRA is fully owned by the spouse with no income, and all the normal rules apply as if she funded it with her own earnings. Since your wife is over 59½, there is never a penalty for withdrawing funds. But she will have her own 5-year clock to wait out for tax-free earnings.

QUESTION:

What options are available for a non-working spouse to contribute to a traditional/Roth IRA, provided that her significant other is employed and has earned income? Thank you.

Respectfully,

Richard

ANSWER:

Richard,

As mentioned in Question 1, both a traditional IRA and a Roth IRA are available for a non-working spouse, regardless of age. If the working spouse has enough compensation to cover both the spouse’s contribution and his own, then he can proceed to fund both of them. The couple must file a joint tax return, and once the funds are in the non-working spouse’s IRA, they are hers to do with as she pleases. All the normal IRA rules apply. If the working spouse is not “covered” by a retirement plan at work, then a spousal contribution to a traditional IRA can be deducted. If the working spouse is covered by a work plan, the phase-out range to deduct the non-working spouse’s traditional IRA contribution was $236,000 – $246,000 of the couple’s modified adjusted gross income (MAGI) for 2025 and is $242,000 – $252,000 of MAGI for 2026. The phase-out range for making a Roth IRA contribution for either spouse was $236,000 – $246,000 of MAGI for 2025 and is $242,000 – $252,000 of MAGI for 2026.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/5-year-clocks-and-ira-options-todays-slott-report-mailbag/

By Ian Berger, JD
IRA Analyst

A few Saturdays ago, many of us moved our clocks one hour ahead to usher in Daylight Saving Time. Adjusting our clocks is a reminder to review the confusing rules surrounding the Roth IRA distribution clocks. It’s no surprise that we continue to get more questions about these rules than just about any other topic.

A good way to keep these rules straight is to remember that there are two different 5-year clocks (also known as “holding periods”). The first determines whether a distribution of converted Roth IRA funds is subject to the 10% early distribution penalty. The second determines whether a distribution of earnings on Roth IRA contributions or conversions is subject to taxes.

The First Clock: Is a Distribution of Converted Dollars Subject to Penalty?

You’re never subject to a 10% penalty when you do a Roth IRA conversion – even if you’re under age 59½. You’re also never subject to a penalty if you receive a distribution of converted Roth amounts when you’re age 59½ or older. But you could be hit with the penalty if you receive a distribution of converted funds when you’re under 59½. This is the only time the first 5-year clock comes into play.

This first clock starts ticking on January 1 of the year of the conversion (no matter what date during the year you actually do the conversion). If you’re under age 59½ and take out converted dollars before the end of the 5-year period, you’ll be penalized (assuming no penalty exception applies). If you do Roth conversions in different years, each year of conversions has its own 5-year clock. But remember: If you don’t touch the converted funds until age 59½ or later, you’ll never have to worry about the first 5-year clock.

The Second Clock: Is a Distribution of Earnings Subject to Taxes?

The second clock helps determine whether earnings on Roth IRA contributions (and conversions) are taxable when distributed. Earnings avoid taxes if two conditions are met: The second 5-year clock is satisfied and you’re at least age 59½ (or disabled or a first-time home buyer). If you satisfy both conditions, your distribution is considered “qualified.”

This second clock starts ticking on January 1 of the year of your first contribution or conversion to ANY Roth IRA. Unlike the first clock, there’s always just one 5-year period for the second clock. If you take out earnings before the end of this 5-year clock, those earnings will be taxable regardless of your age. Getting this second clock ticking is why it’s so important to open up a Roth IRA as early as possible – even if it’s funded with a small amount.

What if you withdraw from your Roth IRA before you meet both conditions for a “qualified distribution?” Favorable Roth IRA “ordering rules” allow contributions and conversions to come out before earnings. This means you can always receive a tax-free distribution of an amount equal to your Roth IRA contributions and conversions. (The amount equal to your contributions is always penalty-free, and the amount equal to your conversions is penalty-free at age 59½ or after the first clock described above is satisfied.) Only after an amount equal to all your Roth IRA contributions and conversions is depleted do you even reach your earnings. Since your withdrawal is “non-qualified,” you’ll have to pay taxes (and possibly a penalty) on that portion of your withdrawal.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/moving-the-clocks-ahead-and-reviewing-the-roth-ira-5-year-clocks/

By Ian Berger, JD
IRA Analyst

Question:

Hello Mailbag Folks,

I may have missed something in one of the Ed Slott newsletters, but I thought that if one contributed to a non-profit directly from an IRA account to the non-profit, the amount would not be taxed. I made my first required minimum distribution (RMD) in this way and my new Form 1099-R shows that the RMD is taxable. Am I incorrect? Are you able to point me in the direction of something to read about this for 2025-2026, please?

Looking forward to any information.

Kind Regards,
Marlene

Answer:

Hi Marlene,

You are correct that a direct transfer from an IRA to a qualifying charity is a non-taxable transaction known as a qualified charitable distribution (QCD). A QCD can satisfy an RMD if it is paid out of the IRA before the RMD comes out. When the custodian issued you a 2025 Form 1099-R, it reported your RMD as fully taxable because it did not know you used a QCD to satisfy all or part of that RMD. It is up to you to disclose on your 2025 Form 1040 that your RMD (or part of it) is not taxable. You do that by reporting the full amount in line 4a, reporting only the difference between the RMD amount and the QCD in box 4b, and checking box 2 (“QCD”) in line 4c.

Question:

We have a client, age 73, that wants to start converting his traditional IRA to a Roth IRA over a period of several years. He has other Roth IRAs that were established over 5 years ago. He was told by an IRS representative that each Roth conversion would have its own 5-year rule before the earnings could be withdrawn without a penalty. I thought that since he is over the age of 59½ and that he has other Roth IRAs that were established over 5 years ago, that the 5-year rule would not apply to his Roth conversions. What do you say on this? I cannot find the answer to this on the IRS website.

Thanks!

Frank

Answer:

Hi Frank,

There are two 5-year holding periods (or clocks) for Roth IRA distributions: one for determining if there’s a penalty on distributions of converted amounts before age 59½, and the other for determining if earnings on Roth IRA contributions and conversions are taxable. Your client doesn’t have to worry about the first 5-year clock because his withdrawals will come out after age 59½. He also doesn’t have to worry about the second clock because his withdrawals will come out after age 59½ and he has had a Roth IRA for at least 5 years. So, all of his Roth IRA distributions will be tax and penalty-free.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/qualified-charitable-distributions-and-roth-ira-5-year-rules-todays-slott-report-mailbag/

By Andy Ives, CFP®, AIF®
IRA Analyst

In our Slott Report entry from March 2 (“Fatal Error: Mistakes That Cannot Be Fixed – Part 1,”) we discussed three irreversible mistakes and the negative consequences of each. Despite any repercussions, certain IRA and retirement plan transactions simply cannot be unwound. As a follow-up to the March 2 entry, here are a few more “fatal errors” that cannot be fixed:

Roth Conversions. While recharacterization of IRA contributions is still allowed, recharacterization of Roth conversions is not permitted. Once the conversion is entered, whatever taxes due will be due. A Roth conversion done by mistake or one that is not wanted “after sleeping on it” cannot be undone. Be sure you understand the ramifications of hitting [ENTER].

NUA Stock Rolled Over to an IRA. The net unrealized appreciation (NUA) tax strategy enables a person to pay long-term capital gains tax on the appreciation of company stock purchased within a company retirement plan. But if the shares are rolled over to an IRA, the NUA opportunity is forever lost. This is a fatal error. The rollover cannot be reversed, and any potential NUA tax savings disappear.

Modifying a 72(t) Plan. A 72(t) distribution program allows a person under age 59½ to access retirement dollars with no 10% early withdrawal penalty. But this is a slippery slope. A modification to a 72(t) distribution schedule, such as randomly changing the amount of the distributions or adding new funds to the account, will disqualify the 72(t) program. The 10% early distribution penalty will apply retroactively to all distributions taken prior to age 59½.

The “Same Property” Rollover Rule. The same property withdrawn from an IRA is the only property eligible to be rolled over. If an IRA owner withdraws cash, then only cash can be rolled over. If a specific stock is withdrawn, then only that stock can be rolled over. If a different property is rolled over, the “illegal” assets in the receiving IRA must be withdrawn as an excess, and the original distribution will face any applicable tax and (potentially) an early withdrawal penalty. (Note that the only exception to this rule is for a distribution from an employer plan where the asset can be sold and the cash from the sale can be rolled over to an IRA.)

Prohibited Transactions. Examples of prohibited transactions include, among other things, self-dealing and transactions with a “disqualified person.” A prohibited transaction will generally disqualify the IRA as of the first day of the year and the assets will become includable in income for that year. Essentially, the entire IRA is deemed to be distributed, and there is no universal fix.

This is not the end of the fatal error list. For example, it is imperative to understand how to divide IRA and retirement plan assets after divorce. Also, be sure to recognize that missing the deadline to establish inherited IRAs could saddle the beneficiaries with a less desirable payout structure. Be careful with all IRA and retirement plan transactions. Some roads are one-way streets, and there is no going back. If the wrong path is taken, there could be no recourse to correct whatever subsequent disaster follows.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/fatal-error-mistakes-that-cannot-be-fixed-part-2/

By Ian Berger, JD
IRA Analyst

If you made excess deferrals to your 401(k) or 403(b) plan(s) in 2025, you need to correct the error while there’s still time. The deadline is April 15, 2026. If you don’t act before then, you’ll be double-taxed on the excess deferrals.

The maximum pre-tax and Roth-elective deferrals you could make for 2025 were $23,500 (plus another $7,500 if you were at least age 50, or another $11,250 if you were age 60-63 at year-end). However, contributions you make to ALL plans during the year are normally combined when applying that limit. (That aggregation rule doesn’t apply if one of your plans is a 457(b) plan.)

You should have no problem if you were in only one plan during 2025. Your plan should have automatically blocked you from exceeding the deferral limit. Even if that didn’t happen, the plan is responsible for fixing the problem.

But you may have a problem if you were in two different plans during the year because you had two jobs at the same time or changed jobs. Since one plan could not be expected to know how much you contributed to the other plan, the burden is on you to keep track of your combined deferrals. Your 2025 Form W-2 from each employer shows the amount of pre-tax and Roth deferrals in Box 12. Or, you can check your plan account statements.

If you’ve overcontributed, IMMEDIATELY contact the administrator of one of the plans and make them aware of the problem. To avoid double taxation (see below), the administrator must correct the error by April 15, 2026.

How is the error corrected? The plan will make a “corrective distribution” to you. A corrective distribution is the excess over the 2025 limit, adjusted for earnings or losses attributable to the excess. The excess deferrals must be added to your 2025 taxable income. (You’ll need to amend your 2025 tax return if you’ve already filed it.) Earnings on the excess are taxable to you in 2026. In early 2027, you’ll receive two 1099-Rs – for the excess deferrals (which you already reported as 2025 taxable income) and the second for earnings (which you’ll need to report as 2026 income).

Example: Ebony, age 49, made $16,000 of 2025 pre-tax deferrals to Alpha Inc.’s 401(k) plan before leaving to work for Beta Inc. in July 2025. Ebony didn’t keep track of her total 2025 deferrals and made another $15,500 of pre-tax deferrals to Beta’s 401(k) – for a total 2025 contribution of $31,500. She exceeded her 2025 deferral limit by $8,000 ($31,500 – $23,500). The excess deferrals earned $1,000. Ebony became aware of this problem in early 2026 and contacted Beta. On March 31, 2026, Beta’s 401(k) made a corrective distribution of $9,000 ($8,000 + $1,000) to her. Ebony must add the $8,000 excess deferral to the 2025 taxable income that she reports on her 2025 tax return. She will add the $1,000 of earnings to her 2026 taxable income when she files her 2026 tax return.

Why is it so important to have this fixed by April 15? If the error isn’t corrected by that date, you’ll be hit with double taxation. The excess deferrals won’t be paid to you, but they’ll still count as 2025 taxable income. Meanwhile, the excess amount, along with related earnings, will be taxable to you a second time in the year they are eventually distributed to you.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/act-quickly-to-avoid-double-taxation-on-excess-401k-deferrals/

By Sarah Brenner, JD
Director of Retirement Education

Question:

Is it wise to designate a grandchild as primary beneficiary for IRA accounts?

Answer:

You can choose to name whomever you want as your IRA beneficiary. If you want your IRA funds to go to your grandchildren, that is your decision and there is nothing wrong with making that choice.

There are some things you will want to be aware of, though, before updating your beneficiary designation. The first is that the SECURE Act has eliminated the stretch for most non-spouse IRA beneficiaries. Your grandchildren will be subject to the 10-year rule unless they are disabled or chronically ill.

There are also some special concerns if your grandchildren are minors. If so, they should not be named directly on the beneficiary form since minors do not have legal authority to conduct business on an investment account. Instead, consider naming a Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) account if the custodian will allow it, or a trust if it is a large IRA.

Question:

When mentioning contribution limits to IRAs, shouldn’t you also mention that earned income is an overriding factor?

Jim

Answer:

Hi Jim,

Tax season is the time when many people consider making contributions to IRAs. Your comment is a good reminder that an individual (or their spouse if married) must have earned income or taxable compensation to contribute to an IRA. This can be wages or income from self-employment. Without it, no IRA contribution is possible, and if your taxable compensation is less than the maximum contribution limit for the year, you will only be able to contribute up to the amount of taxable compensation that you (and your spouse if married) have.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/ira-beneficiaries-and-contribution-limits-todays-slott-report-mailbag/

By Sarah Brenner, JD
Director of Retirement Education

These days many Americans are still working long beyond what has traditionally been retirement age. This may be by choice or by necessity. If this is your situation, you may be keeping funds in your employer plan well into your seventies and maybe even later. There are some big benefits to extending a career. You can continue to contribute to your retirement account and may even be able to take advantage of rules that allow required minimum distributions (RMDs) to be delayed.

Eventually, however, the time will likely come when you will want to take some or all of the funds out of your plan. You may want to roll over those funds to an IRA. A large percentage of employer plan funds do end up in an IRA eventually. At that time, you will need to pay special attention to your RMD if you have one for the year.

Here are five things to know about your RMD when you are doing a rollover from your plan to your IRA.

1. You must take the RMD from your plan. The first thing to understand is that if you have an RMD from the plan for the year, you will need to take that RMD. It is NOT eligible for rollover to an IRA. It cannot be converted to a Roth IRA. The bottom line is that there is no way around it; you must take it.

2. The first-money-out rule applies. The next thing to know is that the
first money out of your plan is your RMD. This is called the first-money-out rule and many people run afoul of it. You cannot roll part of the funds over now to an IRA and take the RMD later from the plan. You cannot roll over your entire plan balance to your IRA and then take the RMD from the IRA later. If you do either of these, you will wind up with an excess contribution in your IRA. That can mean penalties if it is not corrected on time.

3. There is no aggregation for plan and IRA RMDs. Your plan RMD cannot be aggregated with RMDs from your IRA. This means you cannot take it from your IRA. Also, qualified charitable distributions (QCDs) are not available from plans. They are only available from IRAs, so you cannot offset the income from a plan RMD with a QCD.

4. After the rollover, you have an IRA. Once you have taken your RMD, you may roll over the remainder of your eligible plan funds. When they are deposited to your IRA, they become IRA funds and will be subject to all the IRA rules. There will be no IRA RMD due for the funds rolled over to the IRA for the year of the rollover (because you already took your RMD from the plan prior to the rollover). However, in years going forward, RMDs will be due on these funds just like any other IRA funds.

5. Moving your retirement funds can be complicated and the stakes are high. This is especially true when there is an RMD involved. Failing to follow the rules for your RMD can result in adverse tax consequences and penalties. If you have questions about your own situation, the best way to get it right and avoid costly mistakes is to consult with a financial or tax advisor who is knowledgeable in this very specialized area.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/rolling-over-your-retirement-plan-here-are-5-things-to-know-about-your-rmd/

By Andy Ives, CFP®, AIF®
IRA Analyst

When a transactional mistake is made with retirement plan or IRA assets, there is oftentimes a mechanism to correct the error. For example, if too much money is contributed to an IRA, a person can leverage the excess contribution withdrawal rules to remove the excess without penalty (assuming the excess is withdrawn prior to the October 15 correction deadline). In another example, if an IRA owner failed to take his required minimum distribution (RMD), there are procedures in place whereby the person can take the missed RMD and formally request a waiver of the missed RMD penalty from the IRS.

On the other hand, some transactional mistakes have no corrective steps. Once the deed is done, there is no going back. Such missteps can create massive tax bills and result in unintended penalties. Many of these “fatal errors” involve rollovers. Here are a few:

Non-Spouse Beneficiary Rollovers. Only a spouse beneficiary can move inherited plan or IRA dollars between custodians via 60-day rollover. Non-spouse beneficiaries can only move inherited dollars via direct transfer. If pre-tax inherited IRA or plan funds are distributed and payable to a non-spouse beneficiary, those dollars are taxable. End of story. If the recipient tries to roll over the funds, the doors at all potential receiving institutions will be closed. There is no transaction a non-spouse beneficiary can do to reverse what has been done. Any taxes due will be due. As such, it is imperative that non-spouse beneficiaries understand the rollover rules and limitations when attempting to move inherited plan or IRA funds. Failure to do so could result in a significant tax bill and eliminate any ability to spread taxable distributions over a multi-year period.

Spousal Rollover. Spouse beneficiaries are the only beneficiaries that can move inherited dollars into their own account. This is called a “spousal rollover.” However, once this common transaction is completed, it cannot be unwound. If a surviving spouse under age 59½ does a spousal rollover, the inherited assets will follow all the normal rules applicable to a person’s own IRA – including the early distribution rules. If the young surviving spouse then takes a withdrawal from the account, a 10% early distribution penalty will apply (unless an exception exists). If a young spouse knows that she will need access to the funds, a better choice is to delay the spousal rollover for now and maintain an inherited IRA. Any withdrawals from the inherited IRA will be penalty-free, and she can always do a spousal rollover later, after she turns age 59½.

Exceeding the One-Rollover-Per-Year Rule. An IRA owner is only allowed to roll over one distribution received within any 12-month period (for IRA-to-IRA or Roth-IRA-to-Roth-IRA rollovers). If more than one rollover is done, that mistake cannot be fixed. The illegal rollover is deemed to be an excess contribution in the receiving IRA and must be removed. Any pre-tax dollars included in the failed rollover will be taxable. Note that the one-rollover-per-year rule also applies to spousal rollovers if done via 60-day rollover. To sidestep the one-rollover-per-year rule, do direct transfers.

In Part 2 (to be published on March 11), we will discuss more fatal errors that cannot be fixed.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/fatal-error-mistakes-that-cannot-be-fixed-part-1/

By Andy Ives, CFP®, AIF®
IRA Analyst

QUESTION:

What’s your opinion of the value of Trump Accounts? Worth it for kids? Should the child do a Roth conversion at age 18? Or is it better just to do a Uniform Transfers to Minors Act (UTMA) account? Or perhaps a mix of both since the IRA/Roth is retirement-only money and the UTMA would be able to be used before retirement?

ANSWER:

There is no right answer as every person is different and has different objectives. However, you cannot argue with the mathematics of compounding interest. Trump Accounts are saddled with several restrictions, but the long-term saving possibilities cannot be denied. Assume annual $5,000 contributions go into a Trump Account for a child until they reach age 18. Those dollars are required to be invested in a vehicle that tracks the S&P 500 index (or any other index comprised of stocks in primarily U.S. companies). As such, it is not unreasonable to imagine the account being worth north of $150,000 by age 18. Trump Accounts then begin following the standard IRA rules and can be converted to a Roth IRA. With a conservative (by historical standards) 6% average annual return, the account could be worth over $1.7 million, tax-free, by the time the child is age 60.

QUESTION:

I’m age 75 and started to take my required minimum distribution (RMD) from my IRA at age 73. I want to know if I don’t need my RMD money, can I just dump it into my Roth IRA account? I can survive on my pension and Social Security that I receive monthly. Please help!

Thank you,

Barbara

ANSWER:

Barbara,

RMDs are not allowed to be converted, so those dollars cannot be dumped into your Roth IRA. However, after your RMD for the year is satisfied, you could then do a Roth conversion at any time during the rest of the year for whatever amount you wish. While this strategy will generate more taxable income now, it will also reduce future RMDs and result in tax-free earnings on the dollars you convert; short-term pain for potential long-term gain.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/trump-accounts-and-required-minimum-distributions-todays-slott-report-mailbag/

By Ian Berger, JD
IRA Analyst

With contributions to Trump Accounts expected to begin in just a few months, there are some new developments to report.

As a reminder, Trump Accounts are tax-deferred savings accounts for children. They were established by Congress last July as part of the One Big Beautiful Bill Act (OBBBA). Several different kinds of contributions can be made to Trump Accounts:

• A one-time $1,000 contribution from the federal government for children born between 2025 and 2028.
• Individual contributions by parents, grandparents or others on behalf of a child. For 2026, these contributions are limited to $5,000 and are available even for children who don’t qualify for the federal government contribution.
• Employer contributions for children of employees (or for teenage employees). The 2026 annual limit is $2,500, and these contributions count against the $5,000 individual contribution limit.
• Contributions by tax-exempt organizations and governments. These contributions have no annual dollar limit and don’t count against the $5,000 limit.
• Note that none of these contributions can be made before July 4, 2026, and the last three are only for children in the years before they reach age 18.

Trump Accounts are (non-Roth) traditional IRAs. However, until the year the child turns age 18, several special rules apply. For example, the accounts cannot be withdrawn for any reason. In addition, the funds must be invested in a low-cost mutual fund or ETF that tracks the S&P 500 index or another similar index that consists primarily of the stock of U.S. companies.

Here are the new developments:

• On December 2, 2025, the IRS issued Notice 2025-68, which answered some questions about how Trump Accounts will work. Among other things, the IRS said that a Trump Account can be established by filing Form 4547, either by itself or with the 2025 federal income tax return. The IRS has recently created a website, forms.trumpaccounts.gov, that allows Form 4547 to also be completed online. Parents or grandparents can also use Form 4547 to accept the $1,000 federal government contribution for qualifying children.

• Recently, some estate tax attorneys have said that individuals making Trump Account contributions will need to file Form 709 (the gift tax return) with the IRS. This will create an additional headache for parents or grandparents unless Congress or the IRS eases this requirement.

• For federal incometax purposes, all Trump Account contributions (except for individual contributions) are considered pre-tax IRA contributions. This means that taxation of the contributions and their earnings can be deferred until distribution. Individual contributions are considered after-tax IRA contributions, so only their earnings are taxed – but again not until distribution.

For state income tax purposes, most states appear to be following the federal tax treatment. California is an exception. That state has announced that it won’t recognize Trump Accounts as IRA contributions, but instead will treat them as taxable accounts. This means that, in California, employer contributions and tax-exempt organization contributions will be taxed in the year they are made. Only the $1,000 federal government contribution is considered a pre-tax contribution in California (like under federal tax law). In addition, earnings on all types of Trump Accounts contributions will be taxed annually.

The bottom line: California residents who have Trump Accounts will have them taxed one way for federal income tax purposes and another way for state tax purposes.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/new-trump-account-developments/

By Sarah Brenner, JD
Director of Retirement Education

The tax season is upon us. This is the time when many people consider contributing to a retirement account. You may be interested in the Roth IRA, which offers the promise of tax-free withdrawals in retirement if you follow certain rules. If you are deciding whether a 2025 Roth IRA contribution is the right move for you, here are 5 tips to keep in mind:

1. Know the deadline. The deadline for making a prior year contribution to a Roth IRA for 2025 is April 15, 2026. If you have an extension to file your taxes, that does not give you more time. Sooner is better than later. Don’t wait until the last minute, because you never know what may happen. Be sure to let the IRA custodian know the year for which you are contributing.

Interesting fact: Who do you not have to tell about your Roth IRA contribution? That would be the IRS. There is no requirement that you report a Roth IRA contribution on your 2025 federal tax return. It is good practice, however, for you or your tax preparer to keep track of your Roth IRA contributions.

2. Understand your limits. If you were under age 50 in 2025, the maximum contribution that you may make to a Roth IRA for 2025 is $7,000. For those who reached age 50 in 2025, the maximum contribution limit is $8,000. The annual limit is aggregated for traditional and Roth IRAs. For example, you could contribute $5,000 to your Roth IRA and $2,000 to your traditional IRA. You may not contribute $7,000 to your traditional IRA and $7,000 to your Roth IRA for 2025.

3. Have taxable compensation or earned income. You or your spouse must have taxable compensation or earned income to make a Roth IRA contribution. Passive income such as investment income will not work. Social Security income will not work either.

4. Don’t count yourself out too soon. You are never too old to contribute to a Roth IRA. Do you already contribute to a retirement plan at work? That is not a problem. Your participation in your company plan does not affect your eligibility to make a Roth IRA contribution.

5. Consider the Back Door. Your income must be under certain limits to make a Roth IRA contribution. If your 2025 modified adjusted gross income (MAGI) exceeds $150,000 if you are single, or $236,000 if you are married filing jointly, your ability to contribute to a 2025 Roth IRA begins to be phased out.

If your income is too high, you might consider a back-door Roth IRA. You simply contribute to a traditional IRA, which has no income limits (but don’t forget the taxable compensation or earned income requirement), and convert. Sounds intriguing? Check with a knowledgeable tax or financial advisor to see if this is a good strategy for you. If you have pre-tax funds in any IRA, the pro-rata rule will apply to your Roth conversion and make part of your conversion taxable.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/5-tips-for-making-your-2025-roth-ira-contribution/

By Andy Ives, CFP®, AIF®
IRA Analyst

A member of Ed Slott’s Elite Advisor Group℠ emailed us recently with a question about a minor child as beneficiary of her father’s IRA. The question was brief, and I think the expectation was that our reply would be of similar length. But our job is not to answer in the fewest words possible. Our responsibility is to fill in the blanks and make sure that member advisors are armed with all the pertinent details. Here is that communication. (Note: Some details have been changed for privacy.)

QUESTION:

Dad died leaving a $200,000 IRA to his daughter. He was not yet taking required minimum distributions (RMDs). Dad died in 2023. Daughter turned age 15 that year. When does her 10-year window begin?

OUR RESPONSE:

Here are the details in bullet points to keep it all straight:

• Dad died in 2023 prior to his required beginning date (RBD), so no lifetime required RMDs for Dad.
• Daughter is an eligible designated beneficiary (EDB) because she is a minor child of the IRA owner.
• As an EDB, and with death prior to the RBD, Daughter has a choice:
  • 10-year rule with NO annual RMDs. The 10-year period would start in 2024 and end in 2033 when the entire account would need to be emptied.OR…
  • Stretch RMDs starting in 2024 when Daughter was age 16 (at her birthday that year). The single life expectancy for a 16-year-old is 69.0. That would be Daughter’s starting factor in 2024, and she would subtract 1.0 from that number each year (i.e., 68.0 in 2025, 67.0 in 2026). Daughter would take RMDs each year until and including the year she turns age 21 (2029). At that point, the 10-year period kicks in (the year she reaches age 22). Daughter continues with the same RMD factor she was using, minus 1.0, for years 1–9. The account must be emptied by the end of the year (2039) in which Daughter turns age 31.

• If Daughter has not taken any RMDs in 2024 or 2025, and if she wants to leverage the EDB stretch + 10-year rule, then we have missed RMDs for 2024 and 2025. No worries. We follow the missed RMD penalty waiver request process.
• The process is: take the missed RMD, complete Form 5329, send the form and a letter to the IRS explaining what happened, that it has been corrected, and to please waive the missed RMD penalty. The IRS has shown that it is agreeable to work with proactive taxpayers.
• If Daughter wants to stick with just the 10-year rule and no EDB stretch, then no RMDs have been missed, and no penalty waiver request is needed.
• If Daughter goes with this 10-year/no RMD option, I suggest not waiting until the end of year 10 (2033) to deplete the account, because she could face an elevated “balloon” tax bill. A gradual drawdown over the next few years, being mindful of tax brackets, could be wise.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/real-life-scenario-minor-as-edb-beneficiary/

By Andy Ives, CFP®, AIF®
IRA Analyst

A member of Ed Slott’s Elite Advisor Group℠ emailed us recently with a question about a minor child as beneficiary of her father’s IRA. The question was brief, and I think the expectation was that our reply would be of similar length. But our job is not to answer in the fewest words possible. Our responsibility is to fill in the blanks and make sure that member advisors are armed with all the pertinent details. Here is that communication. (Note: Some details have been changed for privacy.)

QUESTION:

Dad died leaving a $200,000 IRA to his daughter. He was not yet taking required minimum distributions (RMDs). Dad died in 2023. Daughter turned age 15 that year. When does her 10-year window begin?

OUR RESPONSE:

Here are the details in bullet points to keep it all straight:

• Dad died in 2023 prior to his required beginning date (RBD), so no lifetime required RMDs for Dad.
• Daughter is an eligible designated beneficiary (EDB) because she is a minor child of the IRA owner.
• As an EDB, and with death prior to the RBD, Daughter has a choice:
  • 10-year rule with NO annual RMDs. The 10-year period would start in 2024 and end in 2033 when the entire account would need to be emptied.OR…
  • Stretch RMDs starting in 2024 when Daughter was age 16 (at her birthday that year). The single life expectancy for a 16-year-old is 69.0. That would be Daughter’s starting factor in 2024, and she would subtract 1.0 from that number each year (i.e., 68.0 in 2025, 67.0 in 2026). Daughter would take RMDs each year until and including the year she turns age 21 (2029). At that point, the 10-year period kicks in (the year she reaches age 22). Daughter continues with the same RMD factor she was using, minus 1.0, for years 1–9. The account must be emptied by the end of the year (2039) in which Daughter turns age 31.

• If Daughter has not taken any RMDs in 2024 or 2025, and if she wants to leverage the EDB stretch + 10-year rule, then we have missed RMDs for 2024 and 2025. No worries. We follow the missed RMD penalty waiver request process.
• The process is: take the missed RMD, complete Form 5329, send the form and a letter to the IRS explaining what happened, that it has been corrected, and to please waive the missed RMD penalty. The IRS has shown that it is agreeable to work with proactive taxpayers.
• If Daughter wants to stick with just the 10-year rule and no EDB stretch, then no RMDs have been missed, and no penalty waiver request is needed.
• If Daughter goes with this 10-year/no RMD option, I suggest not waiting until the end of year 10 (2033) to deplete the account, because she could face an elevated “balloon” tax bill. A gradual drawdown over the next few years, being mindful of tax brackets, could be wise.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/real-life-scenario-minor-as-edb-beneficiary/

By Ian Berger, JD
IRA Analyst

In the January 5 edition of the Slott Report, we mentioned that the federal Thrift Savings Plan (for government workers and the military) started offering in-plan Roth conversions on January 28. This article will provide more information about in-plan Roth conversions generally – how they work, their availability, their tax consequences, and who can most benefit from them.

What is an in-plan Roth conversion? It’s a transfer of funds from your non-Roth 401(k) buckets (e.g., pre-tax elective deferrals, non-Roth after-tax contributions and employer matches) to a Roth account within the same plan. Besides active employees, in-plan conversions can be made by former spouses and surviving spouse beneficiaries with a plan account. Conversions cannot be done by non-spouse 401(k) beneficiaries.

In-plan Roth conversions are available to employees in 401(k), 403(b) and governmental 457(b) plans that permit them. (For the sake of simplicity, references in this article to “401(k) plans” mean 401(k), 403(b) and governmental 457(b) plans.)

In-plan Roth conversions are optional for plans. According to a recent report by the Plan Sponsor Council of America, 56% of surveyed plans allow in-plan conversions at any age, while 6% allow them only at age 59½ or older. So, be sure to check with your plan administrator or company HR to see if in-plan Roth conversions are allowed. By contrast, Roth IRA conversions are always available to traditional IRA owners. Roth IRA conversions are also available to inherited 401(k) beneficiaries, but not to inherited IRA beneficiaries.

When you convert funds in pre-tax 401(k) buckets, the conversion is fully taxable to you in the year you do the conversion. However, when you convert funds in a separate after-tax bucket, only part of the conversion is taxable. The conversion is taxable in the same proportion that after-tax earnings in your after-tax bucket bear to the total balance in that bucket. Note that Roth IRA conversions of after-tax amounts are taxed differently. All of your IRAs, including SEP and SIMPLE accounts, are considered in determining the taxable portion of the conversion.

It’s important to remember that once you do an in-plan Roth conversion, it cannot be undone. This means you must have the funds available to pay that year’s tax bill. You also may need to start making quarterly estimated payments to the IRS (or increase existing estimated taxes). Be sure to check with your financial advisor or CPA.

If you’re under 59½, working for a company with a 401(k) plan and want to boost your Roth savings, an in-plan Roth conversion may be an especially good idea. That’s because you normally can’t get access to your pre-tax plan savings in order to do a Roth IRA conversion while you are still employed. But if the plan allows, you can get those funds into a Roth 401(k) account through an in-plan conversion.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/how-in-plan-roth-conversions-work/

By Sarah Brenner, JD
Director of Retirement Education

If you are age 73 or older in 2026, you will need to take a required minimum distribution (RMD) from your IRA. Usually, an RMD is calculated using the IRS Uniform Lifetime Table. However, if you are married to a spouse who is more than 10 years younger, and your spouse is the sole primary beneficiary of your IRA, there is a special rule that applies. You may calculate your RMD using the IRS Joint Life Expectancy Table instead.

What is the benefit? The RMD will be smaller. This can be an advantage for IRA owners who do not need the money and want to minimize taxable income.

Remember that your spouse must be your sole primary beneficiary for the entire year to use this special rule. If you have named multiple beneficiaries on your IRA, then you must use the Uniform Lifetime Table. Contingent beneficiaries are not considered when determining if your spouse is your sole beneficiary.

This opportunity to take a smaller RMD is often missed. Many IRA custodians default to the Uniform Lifetime Table when providing IRS RMD statements (which are required) to IRA owners. The RMD statement, therefore, may not give you the correct RMD amount if your spouse is your sole beneficiary and is more than 10 years younger than you.

If this is your situation, you may need to manually calculate and request the lower amount. You can find the Joint Life Expectancy Table in IRS Publication 590-B. To calculate the RMD, use the factor that corresponds to the ages that you and your spouse reach on your birthdays in 2026. Then divide that factor into your December 31, 2025, IRA balance. Example: Robert, age 76, is married to Maria, age 60. She is his sole IRA beneficiary. Because Maria is more than 10 years younger and the sole beneficiary, Robert can use the Joint Life Expectancy Table to determine the factor to calculate his RMD for 2026. If Robert and Maria look at the intersection of age 76 and age 60 on this table, the life expectancy factor is 28.2. For comparison purposes, the Uniform Lifetime Table’s factor for age 76 is 23.7, which would result in a larger RMD.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/dont-miss-this-rule-that-allows-smaller-rmds/

By Andy Ives, CFP®, AIF®
IRA Analyst

Each year, in different cities, the Ed Slott team hosts several advisor training events for financial professionals serious about learning. These 2-day programs start with our cannonballing into the retirement account pool, and we do not come up for air – we only swim deeper. The hope is that participants come with at least a basic understanding of what an IRA is, what the benefits are, and how retirement accounts generally operate. However, with so many rules to follow, with the SECURE Act and subsequent regulations, with all the different types of beneficiaries, payout options, rollover rules, and other nuances, it is no surprise that some of the foundational IRA guidelines can be misunderstood. Here are three basic IRA rules that all IRA owners and financial professionals must be aware of:

1. IRA Contributions: Cash Only. The misunderstanding of this rule came across our desk just recently. An advisor was trying to make Roth IRA contributions in the form of stock and mutual funds. His idea was to transfer enough shares of stock and/or mutual funds from his client’s non-qualified brokerage account into a Roth IRA to meet the annual Roth IRA contribution limits ($7,000 plus $1,000 age-50-and-older catch-up in 2025; $7,500 plus $1,100 in 2026). His thought was that the existing earnings on the shares could be transferred into a tax-free account, or the custodian would report the existing earnings as taxable prior to the transfer into the Roth IRA. Neither assumption was accurate. Traditional and Roth IRA contributions must be made in the form of cash. Can you imagine the anarchy and price manipulation if people were allowed to transfer items other than cash into an IRA as a contribution?

2. Same Property Rule. This rule dictates that if a person intends to do a 60-day rollover from one IRA to another, the same property distributed must be rolled over. If you withdraw stock, you must roll over the same stock (although not necessarily the same shares). If you withdraw cash, you must roll over cash. For clarification, we like to say if you withdraw blueberries, you must roll over blueberries. In PLR 201506016, an IRA owner tried to withdraw cash, buy an investment property, and then roll that real estate back into his IRA within 60 days. This ordeal was monitored by the IRA owner’s team of professionals that included a CPA, lawyer, financial advisor, and realtor. Nobody knew the rules. Nobody dissuaded the IRA owner from pursuing this transaction. Ultimately, the rollover attempt was denied by the IRS due to the Same Property Rule. (Note that there is one exception to the Same Property Rule. A person could withdraw stock from a work plan like a 401(k), sell the shares, and roll over the cash proceeds.)

3. One-Rollover-Per-Year Rule. Speaking of 60-day rollovers, a person is allowed only one IRA-to-IRA or Roth-IRA-to-Roth-IRA rollover per year. By “per year,” we mean every rolling 12 months, not a calendar year. Where people get sideways with the One-Rollover-Per-Year rule is failing to understand where the rule does NOT apply. It does not apply to Roth conversions. It does not apply to IRA-to-plan rollovers (i.e., “reverse rollovers”), and it does not apply to plan-to-IRA rollovers. This means a 401(k) owner could chop up a plan and make multiple plan-to-IRA rollovers during the year (assuming the plan allows for multiple rollover transactions).

Our Las Vegas 2-Day training event this February is sold out. If you want to dive into the IRA and retirement account rules pool, you can come see us in Brooklyn, New York, July 9-10, 2026. As one of our current Ed Slott members likes to say, “You can’t learn less.”

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/three-basic-ira-rules-that-must-be-understood/

By Andy Ives, CFP®, AIF®
IRA Analyst

QUESTION:

I am age 75 and have just one IRA. I normally do multiple qualified charitable distributions (QCDs) during the year. I also make one or more partial Roth conversions during the year. Please confirm or correct my understanding on the following:

1. All QCDs, in order to be non-taxable, must be taken prior to finishing my required minimum distributions (RMDs) for the year.

2. RMDs must be completed prior to making any partial Roth conversions.

Thanks!

John

ANSWER:

John,

Regarding question 1, your assumption is incorrect. Yes, QCDs are often used to offset RMD income. However, as long as a person is eligible for a QCD and all the standard QCD rules are followed, then you can do QCDs even after you have taken your entire RMD. The QCD will be an additional distribution over and above what you already withdrew for your RMD, but it can still be done. As for question 2, you are correct. All IRA RMDs (even those from other IRAs) must be satisfied before a person can convert all or a portion of any IRA to a Roth IRA.

QUESTION:

I inherited a Roth IRA from a sister who was one year younger than me. If I choose to stretch distributions over my life expectancy, which chart do I use, and whose age do I use for the first RMD?

ANSWER:

If your sister passed away in 2020 or later, then under the SECURE Act rules, you qualify as an eligible designated beneficiary (EDB) because you are “not more than 10 years younger than the decedent.” As an EDB, you can take full stretch RMDs. The first RMD is based on your age (at your birthday) in the year after the year of your sister’s death. Use the Single Life Table to identify your starting factor, and then subtract 1.0 from that initial factor in each successive year. (You do not get to go back to the table each year and look up a new factor.)

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/required-minimum-distributions-and-inherited-roth-iras-todays-slott-report-mailbag/

By Ian Berger, JD
IRA Analyst

With all the tax changes made by the 2025 One Big Beautiful Bill Act (OBBBA), it’s no surprise that the IRS has made significant changes to the 2025 Form 1040 and supporting schedules and forms. Near the beginning of each year’s 1040 instructions, the IRS includes a section titled “What’s New” that summarizes the tax changes in effect for that year and how they are reflected on the 1040. The “What’s New” section in the 2025 instructions contains 25 items.

One of those items says the following: “Write-in information. Beginning in 2025, most of the words, codes, and/or dollar amounts that are used to explain an item of income or deduction, and that you previously had to enter next to a specific line, now have a dedicated checkbox or entry space.”

This change affects the reporting of IRA and retirement plan distributions on lines 4 and 5 respectively of Form 1040. Line 4a is used to report IRA distributions, while line 4b reports the portion of those distributions that is taxable. Similarly, line 5a is used to report plan distributions, while line 5b reports the taxable portion.

If the taxable portion of an IRA or plan distribution (as reported on lines 4b and 5b, respectively) is smaller than the amount of the IRA or plan distribution (as reported on lines 4a and 5a), the IRS wants to know why. In prior years, you (or your tax software) were required to explain the difference by entering a code word next to line 4b or 5b.

For example, if all or part of an IRA or plan distribution was rolled over, “Rollover” had to be entered next to line 4b or 5b. If you did a qualified charitable distribution (QCD) from your IRA, you had to enter “QCD” next to line 4b. A QCD is a tax-free direct transfer from an IRA to a qualified charity when you are age 70½ or older. If you made a health savings account funding distribution (HFD), you were required to enter “HFD” next to line 4b. An HFD is a one-time tax-free direct transfer of IRA funds to your HSA. Finally, if you are a retired public safety officer and you used part of your retirement plan distribution to make tax-free health insurance or long-term care insurance premium payments, “PSO” had to be entered next to line 5b.

For the 2025 Form 1040, the IRS has added new lines 4c and 5c, which mostly contain boxes to be checked instead of having to write in a code on the form. Line 4c includes a box for “Rollover” (Box 1), another for “QCD” (Box 2), and a blank box (Box 3). The 1040 instructions indicate that Box 3 should be checked and “HFD” should be entered next to Box 3 if you made an HFD. Box 3 should also be checked and a word or code should be entered next to Box 3 if another IRS instruction requires it.

Line 5c includes a box for “Rollover” (Box 1), another for “PSO” (Box 2), and a blank box (Box 3). Box 3 should be checked and a word or code should be entered next to Box 3 if another IRS instruction requires it.

What if more than one item applies? The IRS instructions say to check a box for each item and include a statement showing the amount of each item (for example, “Line 4b – $1,000 Rollover and $500 HFD.”).

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/youll-need-to-report-certain-ira-and-retirement-plan-distributions-differently-on-this-years-form-1040/

By Sarah Brenner, JD
Director of Retirement Education

Everyone has heard the horror stories of how unneeded and unwanted trusts disrupted what should have been a smooth transition of wealth. However, it is important to recognize that estate planning for IRAs is nuanced. Trusts are not all bad and should not be overlooked or dismissed unilaterally. There are times when naming a trust as the beneficiary of an IRA definitely should be considered and may be, in fact, necessary for the best outcome.

One situation where a trust should be considered is when the IRA owner’s minor children are involved. If you want to leave your IRA to an adult, you simply name that person on the IRA beneficiary form. Unfortunately, when it comes to minors, it is not that easy. When a minor inherits retirement dollars, the child is not legally able to make financial decisions. A trust is a good strategy to address this problem.

SECURE Act Impact

The SECURE Act changed the rules for beneficiaries of inherited IRAs, including minors. Now most non-spouse beneficiaries are subject to the 10-year rule. However, there is a special rule for some minors. ONLY minor children of the IRA owner are considered to be eligible designated beneficiaries (EDBs) and can take required minimum distributions (RMDs) based on their single life expectancy until age 21. At that time, the 10-year rule would apply. Annual RMDs would be required to continue during years 1-9 of the 10-year period, and the account would need to be emptied by the end of the tenth year.

Trust for a Minor

The rules for RMDs from inherited IRAs paid to trust beneficiaries can be complex, but it is possible to still get the stretch, like when a trust for a minor child of the IRA owner is named as an IRA beneficiary.

The SECURE Act and its regulations maintain the “see-through trust” rules that existed under prior law. If a trust for a minor child of the IRA owner meets these requirements and the child is the beneficiary of a conduit trust, then RMDs can be stretched over the child’s life until age 21, when the 10-year rule will apply.

Example: Rick died in 2020. The beneficiary of his IRA was a qualified conduit trust established for the benefit of his minor daughter, Ava, age 12 at the time. Until Ava reaches age 21, RMDs from the trust-held inherited IRA paid to the trust can be stretched over Ava’s single life expectancy.

Once Ava reaches age 21, the 10-year rule will apply. By the end of the 10 years, all of the remaining trust-held inherited IRA funds will be paid to the trust. In addition, under the regulations, RMDs must continue (from the inherited IRA to the trust and from the trust to Ava) for years 1-9 of the 10-year term. Since RMDs had already begun based on Ava’s single life, they cannot be stopped during the subsequent 10-year term.

Takeaway

Estate planning with IRAs is complicated and everyone’s situation is different. Naming an unnecessary trust as an IRA beneficiary often brings unneeded complication and no benefit. However, if you are naming your minor children as your IRA beneficiary, a trust may, in fact, be necessary. Be sure to consult with a knowledgeable financial advisor or estate planning attorney to see if naming a trust as IRA beneficiary would be a good strategy for you.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/naming-a-trust-for-a-minor-as-ira-beneficiary/

By Ian Berger, JD
IRA Analyst

Question:

If I have had my Roth IRA for 20 years and I do a conversion from my traditional IRA, is the five-year rule in effect for each conversion? I’m under the impression that once I held my Roth for more than five years I don’t have to be concerned about the five-year rule.

Note that I am over age 70.

Dan

Answer:

Hi Dan,

You’re in good shape. The amount you convert will always be available for withdrawal tax-free. In your case, the converted amount will also be immediately available penalty-free since you’re at least age 59½. (The five-year rule on penalty-free distributions of conversions doesn’t apply once you turn age 59½.) You can also withdraw earnings on the converted amount without tax or penalty at any time. That’s because you’re at least age 59½ and have held a Roth IRA for at least five years. (In other words, you’ve satisfied the five-year rule on tax-free distributions of earnings.)

Question:

Hello!

I will be age 73 on February 9, 2026. I am still working and have a current 401(k) account. I don’t intend to retire but plan to work for a couple of years, until I turn age 75.

I also have a traditional IRA account. To avoid taking required minimum distributions (RMDs) from the IRA account, I am considering rolling over that account to my 401(k) account. Please let me know if I could do that to avoid RMDs.

Jaywanth

Answer:

Hi Jaywanth,

Sorry, but that won’t work. Since you are turning age 73 this year, 2026 is your first RMD year for your IRA. This means you must first take the 2026 RMD before doing a rollover to your 401(k). That’s because the first dollars distributed out of your IRA in 2026 are considered RMDs, and RMDs can’t be rolled over. (Whether you could still roll over the remaining part of your IRA to the 401(k) depends on whether your 401(k) plan allows rollovers into the plan.)

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/roth-ira-distribution-rules-and-rollovers-of-required-minimum-distributions-todays-slott-report-mailbag/

By Andy Ives, CFP®, AIF®
IRA Analyst

Excess IRA contributions occur for many reasons, like making a contribution without eligible compensation, accidentally exceeding the Roth IRA phase-out limits, rolling over a required minimum distribution (RMD), etc. Excess contributions to 401(k) plans can also occur. A plan participant might contribute to one plan, quit, get a new job, and then inadvertently exceed the combined annual deferral limits to plan #2 at the new job. Regardless of why an excess happened in either an IRA or a 401(k), the correction methods between the two are drastically different.

The penalty for an excess IRA contribution is 6% of the excess if it is not timely corrected. With a “timely” correction, the excess is typically removed from the IRA, along with the earnings, i.e., the “net income attributable” or “NIA,” by October 15 of the year after the year of the excess (October 15, 2026 for a 2025 excess). Corrections made after the October deadline do not require the removal of the NIA.

Another IRA correction method allowed prior to the October 15 deadline is recharacterization. While recharacterization of Roth IRA contributions is no longer allowed, recharacterization of IRA contributions is still permitted. A traditional IRA contribution can be recharacterized to a Roth IRA or vice versa. This can be a valuable tool for the right person. An IRA contribution can be recharacterized for any reason at all as long as it can be a valid contribution to the other type of IRA. An excess IRA contribution could also be “carried forward” to a later year, but the 6% penalty would still apply in the year of the excess. Ultimately, the 6% penalty applies for each year the excess remains in the IRA as of December 31, and that penalty is paid via Form 5329.

With a 401(k), the corrective process is completely different. There is no recharacterization option, and the 6% penalty (applicable to IRAs) has no bearing. The deadline for correction is April 15 of the year after the year of the excess contribution. If the excess 401(k) contribution (plus earnings) is not removed from the plan by the deadline, those dollars remain in the plan. The fallout is double taxation. The excess 401(k) contribution must be reported as taxable income for the year of the excess contribution, and those dollars are taxed again upon distribution from the plan.

Example: Daniel, age 47, works for ABC Co. and participates in their 401(k) plan. For 2025, Daniel defers a total of $15,000 from his salary into the ABC Co. plan. In June of 2025, Daniel quits his job at ABC Co. for a better opportunity with XYZ, Inc. One of the perks offered by XYZ, Inc. is immediate eligibility for the
XYZ, Inc. 401(k). Daniel starts salary deferrals and, over the remainder of 2025, defers $12,000 into the XYZ, Inc. 401(k). For 2025, Daniel has deferred a combined total of $27,000 into the ABC Co. and XYZ, Inc. 401(k) plans. This puts him $3,500 over the 2025 salary-deferral limit of $23,500. If the $3,500 excess (plus earnings) is not removed from one of the plans by April 15, 2026, then those dollars remain in the 401(k). Daniel will be taxed on the $3,500 of income in 2025, and the excess (plus earnings) will again be taxed upon withdrawal in the future.

IRAs and 401(k) plans have many similarities. However, the correction methods for fixing an excess contribution are not one of them.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/a-different-fix-excess-ira-vs-401k-plan-contributions/

By Ian Berger, JD
IRA Analyst

Thinking about leaving your job? Make sure you understand the vesting schedule that applies to your retirement plan. It may pay to stick it out a little longer to become more “vested” in your plan. Otherwise, you may lose out on valuable benefits.

What does it mean to be “vested”? Vesting tells you how much of your plan benefit you actually own and cannot be taken away from you:

• If you’re fully vested, you’re entitled to 100% of your benefit.
• If you’re partially vested, you only get a portion of your benefit.
• If you’re 0% vested, you receive no benefit at all.

In the case of a partially-vested or 0%-vested benefit, the unvested portion of your benefit will be forfeited and used by your employer to make future company contributions or pay administrative expenses.

You receive vesting credit based on your service with your employer. Most plans award you with a year of vesting service for each 12-month period that you work at least 1,000 hours. Other plans measure vesting service based on the total period of your employment from date of hire to date of separation. (Special rules may apply if you were previously a part-time employee.) Check the plan’s written summary or speak with the plan administrator or HR for more details.

In a defined contribution plan like a 401(k), 403(b) or 457(b), your own contributions (whether pre-tax deferrals, Roth contributions, or non-Roth after-tax contributions) and associated earnings are immediately 100% vested. However, employer matching contributions (or other employer contributions) and associated earnings may either be immediately 100% vested or subject to a vesting schedule.

If your plan uses a vesting schedule, it must be either “cliff vesting” or “graded vesting.” If cliff vesting is used, the schedule must be at least as favorable as the following:

Years of Service                                            Cliff Vesting

1                                                                   0%

2                                                                    0

3 +                                                             100

If graded vesting is used, the schedule must be at least as favorable as the following:

Years of Service                                          Graded Vesting

1                                                                   0%

2                                                                  20

3                                                                  40

4                                                                  60

5                                                                  80

6 +                                                             100

Example: Selina participates in a 401(k) plan with a 6-year graded vesting schedule for employer matching contributions. She leaves her job after three years of service with $40,000 in her pre-tax deferral account and $8,000 in her match account. Selina can directly roll over $43,200. That represents 100% of her deferral account ($40,000) and 40% of her match account ($3,200). The unvested part of her match account ($4,800) will be forfeited.

Most defined benefit pension plans use a 5-year cliff vesting schedule where benefits become 100% vested after five years of service.

By law, your benefit under any company plan must become 100% vested, regardless of years of service, when you reach the plan’s “normal retirement age” (typically age 65) or when the plan terminates. Many plans also provide for 100% vesting if you die or become disabled.

Your IRAs, including SEP or SIMPLE IRAs, are not subject to vesting rules. You can receive the full value of your IRA accounts at all times.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/how-the-vesting-rules-work-for-company-retirement-plans/

By Sarah Brenner, JD
Director of Retirement Education

Question:

Hello!

I have been a big fan for a long time. I have a question regarding a Roth IRA I inherited from my younger brother last year. I have heard that I must empty this account by the end of 2035. I have also heard that I can stretch distributions over my life expectancy. Which is correct?

Answer:

Thank you for the kind words! Both are actually correct. You are an eligible designated beneficiary (EDB) because you are older than your brother. Any beneficiary who is not more than ten years younger than the IRA owner is an EDB. Being older means you are not more than ten years younger. As an EDB who inherited a Roth IRA, you have a choice. You can choose the 10-year rule with no annual required minimum distributions (RMDs), or you can choose to use the stretch.

Question:

Can I make a Roth IRA contribution if I am contributing to a Roth 401(k) at my job?

Answer:

Yes, assuming your income does not exceed the Roth IRA contribution phaseout levels. Your ability to make a Roth IRA contribution is not affected by your participation in a Roth 401(k) at work. As long as you are otherwise eligible, you can go ahead and make a Roth IRA contribution.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/eligible-designated-beneficiaries-and-roth-ira-contributions-todays-slott-report-mailbag/

By Sarah Brenner, JD
Director of Retirement Education

IRA and Roth IRA contributions are only permitted when you have taxable “compensation” or earned income. Typically, whether or not a person has compensation is a relatively straightforward determination. For most individuals, compensation comes from employment, either as an employee or from self-employment income. Confirmation of compensation can be found in box 1 of the person’s W-2 form. Any amount listed there qualifies as compensation.

As is often the case with IRAs, special rules exist for spouses when it comes to compensation. A spouse with little or no compensation can make an IRA contribution based on his spouse’s compensation. If the higher-compensated spouse has enough eligible income, both spouses can make the maximum IRA contribution.

For the lower-compensated spouse, the most that can be contributed for 2026 to an IRA is the smaller of the following two amounts:

1. $7,500 ($8,600 if age 50 or older), or

2. The combined compensation of both spouses for the year, reduced by the higher-compensated spouse’s IRA contribution for the year.

This means that the total combined contributions that can be made to 2026 IRAs can be as much as $15,000 ($16,100 if only one of you is age 50 or older, or $17,200 if both of you are age 50 or older).

Example: Randy, age 57, is unemployed in 2026. He has no compensation. He marries his girlfriend, Rita. Rita, age 52, has $75,000 in compensation from her job in 2026. Both Rita and Randy can contribute $8,600 to their IRAs for 2026.

Rules to Keep in Mind

If you and your spouse are thinking about making spousal contributions, here are some rules to keep in mind:

1. You may make spousal IRA contributions in some years and regular IRA contributions in others.
2. There is no need to keep regular and spousal contributions in separate IRAs.
3. There is no need to inform the IRA custodian that you are making a spousal contribution instead of a regular contribution because there is no special reporting required by the IRS.
4. Spouses are not required to contribute to the same type of IRA. One may choose to contribute to a traditional IRA, and the other may contribute to a Roth IRA.
5. Spouses are also not required to make their contributions at the same time or with the same IRA custodian.
6. To make a spousal contribution for the year, the couple must be legally married on December 31 of that year.
7. The couple must file a joint federal income tax return for the year.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

By Andy Ives, CFP®, AIF®
IRA Analyst

In our December 8, 2025 Slott Report entry (“Yes, RMDs Apply to Inherited Roth IRAs, But…”), we wrote about the application of required minimum distributions (RMDs) to inherited Roth IRAs. As expected, that article received significant attention. One reader asked if we could expand on the topic by discussing how an inherited Roth IRA is passed to the next beneficiary in line, i.e., to a successor beneficiary.

Successor beneficiaries (the beneficiary of a beneficiary) do NOT get to use any of their own personal information or status to dictate the payout structure of an inherited IRA. It does NOT matter who the successor beneficiary is or what the successor’s relationship to the first beneficiary is. It does NOT matter if the successor is a spouse, disabled or a minor child. The successor’s status as either an eligible designated beneficiary (EDB) or a non-eligible designated beneficiary (NEDB) plays NO role in determining the required payout of the inherited IRA. The successor simply “steps into the shoes” of the previous beneficiary and follows the exact same payout program that applied to the original Roth IRA beneficiary, with one exception (outlined in Example #2 below).

As explained in the December 8 Slott Report article, if the first beneficiary of a Roth IRA is an NEDB, then the 10-year rule applies. Since original Roth IRA owners are never subject to RMDs while alive, there are no annual RMDs in years 1-9 within the 10-year period. The account simply needs to be emptied by the end of the 10^th year, starting in the year after the year of death. If the first beneficiary dies during that 10-year period, the successor beneficiary “steps into the shoes” of the first beneficiary and continues with the existing 10-year window, still with no annual RMDs. A successor does NOT get to add an additional 10 years.

Example 1, NEDB: Grandfather Gary dies with a Roth IRA. The beneficiary of Grandfather Gary’s Roth IRA is Adult Son Sam, who qualifies as an NEDB. As such, Adult Son Sam gets the 10-year rule with no annual RMDs within the 10-year period. Sadly, Adult Son Sam dies 7 years later. The successor beneficiary for Adult Son Sam’s inherited Roth IRA is Wife Wanda. It does not matter that Wife Wanda is the spouse of the first beneficiary. Wife Wanda is a successor beneficiary. Wife Wanda steps into the shoes of the first beneficiary and continues with the existing 10-year period. Wife Wanda must empty the inherited Roth IRA within 3 years.

The December 8 Slott Report also outlined how an EDB can leverage the stretch RMD rules on an inherited Roth IRA. The status of the original beneficiary impacts the successor’s payout.

Example 2, EDB: Grandma Jones dies with a Roth IRA. The beneficiary of Grandma Jones’ Roth IRA is Daughter Debbie. Daughter Debbie is disabled, which qualifies her as an EDB. Accordingly, Daughter Debbie can stretch annual RMDs on the inherited Roth IRA over her own single life expectancy. Sadly, Daughter Debbie dies 7 years later. The successor beneficiary for Daughter Debbie’s inherited Roth IRA is Husband Harold. It does not matter that Husband Harold is the spouse of the first beneficiary. Husband Harold is a successor beneficiary. Husband Harold steps into the shoes of the first beneficiary. Husband Harold continues with Debbie’s exact same RMD factor, minus 1.0 each year. Additionally, Husband Harold must ALSO initiate a 10-year period. Husband Harold will have annual RMDs in years 1-9 and must empty the inherited Roth IRA by the end of the 10^th year after the year of the first beneficiary’s death. (If Husband Harold dies within 10 years, the next beneficiary, the successor of the successor, would step into Harold’s shoes and continue with the same RMD factor and whatever remains of the 10-year window).

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/inherited-roth-iras-and-successor-beneficiaries/

By Andy Ives, CFP®, AIF®
IRA Analyst

QUESTION:

Hello,

I am searching for confirmation that Roth SIMPLE IRA contributions are not limited by modified adjusted gross income (MAGI) in the same way that Roth IRA contributions are. This is not addressed in any of the articles or blogs I have read. I am setting up a SIMPLE plan as an employee-owner in 2026. I would prefer to make my deferrals into a Roth IRA, but have too much income to contribute. I hope you can help me clear this up!

Thank you,

Tracy

ANSWER:

Tracy,

While there are MAGI limits for making a Roth IRA contribution (in 2026, $242,000 – $252,000 for those married filing jointly; $153,000 – $168,000 for single filers), there are no such restrictions when contributing to the Roth portion of a work plan like a SIMPLE or 401(k). A person with a million-dollar salary could still make Roth contributions to a work plan. Additionally, IRS Publication 590-A includes a worksheet titled “Modified Adjusted Gross Income for Roth IRA Purposes.” There is no similar worksheet applicable to work plans, because MAGI has no impact on Roth contributions to workplace retirement plans.

QUESTION:

Your Q&A posts are excellent, down-to-earth and understandable – very much appreciated.

My question is about my mother-in-law who inherited a SEP IRA account a couple of years ago when her sister passed away (she was self-employed). Both were over age 73 at the time.

One advisor stated that my mother-in-law cannot satisfy the required minimum distribution (RMD) from that SEP IRA account with a qualified charitable distribution (QCD) and refuses to allow the distribution to be done as a QCD. Another advisor claims that she can use the QCD rules because the SEP IRA is not receiving contributions and has not for many years, so it is not an active SEP IRA. Please let me know your thoughts.

John

ANSWER:

John,

Thank you for the feedback about our Q&A Mailbag! In the scenario you outlined, advisor #2 is correct. Yes, a QCD can be done from that inherited SEP IRA. Your mother-in-law is over age 70½, so she is eligible to do a QCD. The fact that it is an inherited SEP IRA eliminates the possibility that any dollars are being contributed to it on behalf of your mother-in-law. This means the SEP IRA is inactive (as you described), which opens the door to allowing QCDs from that account.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/simple-plans-and-qualified-charitable-distributions-todays-slott-report-mailbag/