As a follow-up to the recent post on this blog The One-Rollover-Per-Year Rule: Revised, the IRS has recently released some additional guidance on the subject, via Announcement 2014-15. As previously mentioned, the IRS has determined to begin using the one-rollover-per-year rule applied to ALL IRAs that the taxpayer owns, rather than only the affected IRAs that have been involved in a rollover. According to the Announcement, the IRS fully acknowledges that the previous understanding of the rule was that it applied on an IRA-by-IRA basis. In fact, there was a Proposed Regulation § 1.408-4(b)(4)(ii) on the books that was to further define the rule as applied only to the involved IRAs. Ever since the Tax Court decided otherwise in the case Bobrow v. Commissioner (TC Memo 2014-21), the rule has been changed. According to the recent announcement though, this will not take affect across the board until January 1, 2015. […]
IRA
How Does an Early Withdrawal from a Retirement Plan Affect My Taxes?
Oftentimes we are faced with difficult situations in life – where we need extra money to pay for a major car repair, a new roof for the house, or just day-to-day living expenses – and our emergency funds are all tapped out. Now your options become poor: should I go to a payday loan place, put more on my credit card? My mortgage is upside-down so there’s no home equity loan in my future, and I can’t ask my folks for a loan, I’ve asked them for too much. Hey, what about my retirement plan? I’ve got some money socked away in an IRA that’s just sitting there, why don’t I take that money? It’s really tough to be in a situation like this, but you need to understand the impacts that you’ll face if you decide to go the route of the IRA withdrawal, especially if you’re under age […]
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How Much Do I Need to Save: Part II
Last week I gave some general indications on how much someone needed to save. We used general percents and some basic numbers but this week I want to actually put those numbers to work. For example – let’s say we have a 30 year old couple that says they would like to have $3,000,000 saved at retirement (assume their both the same age and will both retire at 65). We’ll also assume that they have not started saving yet. Using a 5% compounded annual rate of return this couple would need to save about $2,640 per month for 35 years in order to hit their goal. If we assume they’ve amassed $50,000 by age 30, then they only need to save $2,388 per month. If we use the $2,388 as our savings made at 10% that means our annual income for the couple is about $286,560. Using the same amount […]
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The One-Rollover-Per-Year Rule: Revised
In a surprising decision, US Tax Court has ruled that the One-Rollover-Per-Year rule applies to all IRAs, rather than to each IRA separately as was previously thought. IRS Publication 590, Individual Retirement Arrangements (IRAs), has the following information in regard to the one-rollover-per-year rule: Waiting period between rollovers. Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA. You also cannot make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover. The 1-year period begins on the date you receive the IRA distribution, not on the date you roll it over into an IRA. The use of the term “that same IRA” has always been taken to mean that the rule applies […]
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2014 IRA MAGI Limits – Married Filing Separately
Note: for the purposes of IRA MAGI qualification, a person filing as Married Filing Separately, who did not live with his or her spouse during the tax year, is considered Single and will use the information on that page to determine eligibility. For a Traditional IRA (Filing Status Married Filing Separately): If you are not covered by a retirement plan at your job and your spouse is not covered by a retirement plan, there is no MAGI limitation on your deductible contributions. If you are covered by a retirement plan at your job and your MAGI is less than $10,000, you are entitled to a partial deduction, reduced by 55% for every dollar (or 65% if over age 50), and rounded up to the nearest $10. If the amount works out to less than $200, you are allowed to contribute at least $200. If you are covered by a retirement […]
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2014 MAGI Limits for IRAs – Married Filing Jointly or Qualifying Widow(er)
Note: for the purposes of IRA MAGI qualification, a person filing as Married Filing Separately, who did not live with his or her spouse during the tax year, is considered Single and will use the information on that page to determine eligibility. For a Traditional IRA (Filing Status Married Filing Jointly or Qualifying Widow(er)): If you are not covered by a retirement plan at your job and your spouse is not covered by a retirement plan, there is no MAGI limitation on your deductible contributions. If you are covered by a retirement plan at work, and your MAGI is $96,000 or less, there is also no limitation on your deductible contributions to a traditional IRA. If you are covered by a retirement plan at your job and your MAGI is more than $96,000 but less than $116,000, you are entitled to a partial deduction, reduced by 27.5% for every dollar […]
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2014 MAGI Limits – Single or Head of Household
Note: for the purposes of IRA MAGI qualification, a person filing as Married Filing Separately who did not live with his or her spouse during the tax year, is considered Single and will use the information on this page to determine eligibility. For a Traditional IRA (Filing Status Single or Head of Household): If you are not covered by a retirement plan at your job, there is no MAGI limitation on your deductible contributions. If you are covered by a retirement plan at work, if your MAGI is $60,000 or less, there is also no limitation on your deductible contributions to a traditional IRA. If you are covered by a retirement plan at your job and your MAGI is more than $60,000 but less than $70,000, you are entitled to a partial deduction, reduced by 55% for every dollar over the lower limit (or 65% if over age 50), and […]
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New Year’s Resolutions You Can Keep
This time of year it’s cliché to make resolutions for the coming year. Whether it’s to lose weight, stop a bad habit, or begin saving for retirement, many of us set these goals at the beginning of the new year. And then three weeks into the new year, we’ve left that goal astern – having changed nothing at all. The problem is in how we set goals for ourselves. For example, we might make the bold statement that we want to lose weight. Often, that’s all there is to our resolution – but there’s much more to setting a goal than making a statement about it. There has to be a plan, and some specifics around the goal. If the resolution is to lose weight, first of all you need to put some specifics around that goal: I want to lose fifteen pounds in 2014. Now, how are you going […]
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Annuities – Fees, Expenses, and Taxes
Last week we covered some of the differences in annuities and the various types of annuities someone can purchase. In our final annuity installment (no pun intended) I want to explain some of the fees and expenses that some annuities and annuity providers employ. As mentioned in my first annuity article annuities are an insurance product – insuring against living too long. Most companies that offer annuities will charge for this insurance by means of what are called mortality and expense charges. M&E charges can be as low as .25% to as high as over 2%. These charges are the expenses the annuity company charges to the entire risk pool of policyholders in order to pay for the few that will outlive their life expectancy. Most policyholders and annuitant will not outlive their life expectancy and thus pay for those that do. M&E charges will also help the annuity company […]
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IRA Options Between Ages 60 and 70
There are lots of articles around that speak to what you can and cannot do with your IRA before you reach age 59½, and more that address what you must or must not do with your IRA after you’ve reached age 70½. But what can you do in the interim period? Surprisingly, you have all the control you may wish for. After you’ve reached age 59½, you are free to take withdrawals from your traditional IRA with no penalties. You will have to pay tax on any withdrawal from the IRA, but otherwise there’s no downside to taking money out of the account. For a Roth IRA, of course there’s no tax on the withdrawal. You’re free to take as much as you like (or as little) at any time. Of course, these withdrawals from either type of account, Roth or traditional, will forever remove the funds from the tax-protected […]
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Bloggers Are Encouraging Adding 1% More to Your Savings Rate
In November we financially-oriented bloggers have banded together to encourage folks to increase their retirement savings rate by at least 1% more than the current rate. It’s a small step, but it will pay off for you in the long run. Given the poor level of savings rate (less than 5%) these days, even this small step will be a big boost for many people’s savings. Below is the list of my fellow bloggers who have written articles showing ways that you can start to increase your savings rate, as well as showing what the benefits can be. Thanks to everyone who has participated so far – and watch for more articles in the weeks to come! The Journey of $1 Million Dollars Begins with 1% by Richard Feight, @RFeight Give Yourself A Raise by Ben Rugg, @BRRCPA The 1 Percent Solution by John Davis, @MentorCapitalMg Friday Financial Tidbit-What increasing your […]
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C’mon America! Increase your savings rate by 1% more!
This November we’re encouraging folks to increase their retirement savings rate by at least 1% more than the current rate. It’s a small step, but it will pay off for you in the long run. Below is the list of my fellow bloggers who have written articles showing ways that you can start to increase your savings rate, as well as showing what the benefits can be. Thanks to everyone who has participated so far – and watch for more articles in the weeks to come! THE 1% MORE BLOGGING PROJECT by Robert Flach, @rdftaxpro A Simple Strategy to Maximize Open Enrollment by Jacob Kuebler, @Jakekuebler Take a Small Step: Increase Your Savings by 1% by Jim Blankenship, @BlankenshipFP
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The Other Life Insurance – Annuities
The last few weeks I have been writing about the more conventional form of life insurance that most people are familiar with when I say ‘life insurance’ – which is protection against a premature death. The other life insurance is that which protects your from living too long – and that insurance is the annuity. Over the years annuities have gotten a bad rap – and rightfully so. Like life insurance, annuities are generally sold to the public via a sales force of licensed agents. In most cases, they are not the right vehicle for the individual (I know I am setting the blog up to receive the thunderous rebuttals) but there may be cases where an annuity makes sense. The other reason annuities get a bad rap is because of the pure insurance (longevity) feature that they provide – especially pure life annuities. A pure life annuity is simply […]
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Retirement Plan Contribution Limits for 2014
The IRS recently published the new contribution limits for various retirement plans for 2014. These limits are indexed to inflation, and as such sometimes they do not increase much year over year, and sometimes they don’t increase at all. This year we saw virtually no increases for most all contribution amounts, but as usual the income limits increased for most types of account. IRAs The annual contribution limit for IRAs (both traditional and Roth) remains at $5,500 for 2014. The “catch up” contribution amount, for folks age 50 or over, also remains at $1,000. The income limits for traditional (deductible) IRAs increased slightly from last year: for singles covered by a retirement plan, your Adjusted Gross Income (AGI) must be less than $60,000 for a full deduction; phased deduction is allowed up to an AGI of $70,000. This is an increase of $1,000 over the limits for last year. For […]
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Call All Bloggers! 2nd Annual 1% More Blogging Project
I’m sure that I’m not alone in the financial planning world with my concern about the rate of saving toward retirement across this great land. Recent figures have shown that we Americans are not doing as this year as last, at a 4.6% rate versus 5% last year when we started this project. This is a dismal figure when you consider how most folks are coming up way short when they want to retire. Just like last year in November, I thought maybe something could be done to encourage an increase in savings – if only by 1%, this can be a significant step for lots of folks. November is the perfect time to do this, as most corporations are going through the annual benefit election cycle, so the 401(k) (or 403(b), 457, or other savings plan) is right at the forefront for many folks. I’m proposing that all financially-oriented […]
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Take a Small Step: Increase Your Savings by 1%
As savers, we Americans are not doing a good job. We’re improving (according to recent data), but still way behind what we should be saving. But it doesn’t have to be that way – you can take small steps to increase your savings right away, and it doesn’t have to hurt. The Bureau of Economic Analysis recently reported that we are saving at a rate of around 4.6% of disposable personal income, an increase of 0.1% over the prior month. On a per-person basis, that works out to about $1,831 saved per month, or just short of $22,000 per year. Since we know that very, very few people are exactly average (by definition most people are going to be something above or below the average), what concerns me is that even those who are a bit above the average are still not saving enough. And woe to those who are […]
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NUA Allocation Twist – Not as Easy as it Looks
I’ve written much about the Net Unrealized Appreciation (NUA) treatment for company stock in a 401(k) plan – this is the provision that allows you to pull out company stock as part of a full distribution from the plan and get favorable tax treatment for the gain on the stock. More about NUA can be found in this article about Net Unrealized Appreciation Treatment. One of the factors in that article speaks to a special way to allocate the basis (original cost) of the stock. Specifically, if handled correctly, the ordinary income tax on the NUA move can be minimized or eliminated, and the capital gains treatment maximized. However. (As you know, there’s always a however in life!) The problem with this move is that you absolutely must get the 401(k) administrator to go along with your plan – in order to make sure that the 1099R generated by your […]
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How the 3.8% Surtax Could Influence Roth Conversions
Note: This is a dust-off of an article written in April 2010 that dealt with the special two-year taxation of Roth Conversions that was available in that year. An astute reader noted that the original was a bit dusty and not applicable to today’s decision-making (thanks S!). One of the provisions of the Affordable Care Act is a new tax – a surtax on investment income over certain amounts. This surtax has come into play this year, for tax returns filed in 2014 on 2013 income. The income amounts are, admittedly, rather high, but nonetheless will likely impact a lot of folks. What you may not realize is that, due to the application of this surtax, Roth IRA conversion strategies that you may have had in play may be impacted. Depending upon your overall income, you may have to pay the surtax on some or all of your conversion amount. […]
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When Rolling Over a 401(k) to an IRA Isn’t a No-Brainer
Oftentimes when folks are considering leaving employment, the decision to rollover 401(k) to an IRA is a no-brainer. After all, why would you leave your retirement funds at the mercy of the constricted, expensive investment choices and other restrictions of your old company’s 401(k) administrator, when you can be free to invest in any (well, most any) investment you choose, keeping costs down, and completely within your own control in an IRA? Well, for some folks this decision isn’t the straightforward choice that it seems to be, for the very important reason of access to the funds before reaching age 59½ (see this article for more info about The Post-55 Exception to the 10% Penalty for Withdrawals from 401(k)). Since only within a 401(k) (or other employer-sponsored plans) can you take advantage of this early withdrawal exception, it might be in your best interests to think about your rollover choice […]
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5 Essential Financial Planning Steps for Your 30s and 40s
(jb note: the article below is from my friend Roger Wohlner, who blogs at The Chicago Financial Planner.) Many of the calls that I receive are from folks in their 50s or 60s who are either within sight of retirement or already retired. Many of these callers are pretty well-prepared for retirement and are seeking my help to fine-tune their situation and/or to help them through this next phase of life. This type of financial readiness doesn’t just happen it takes planning and preparation. Here are 5 essential financial planning steps for those of you in your 30s and 40s to help you reach your retirement goals and more importantly to help you achieve financial independence. Get started If for whatever reason you haven’t done much of anything to ensure your financial future it’s time to get going. Today is the best day to get started, tomorrow is the second best […]
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
A Medicare Owner’s Manual, is updated with 2020 facts and figures. This manual is available on 
Social Security for the Suddenly Single can be found on Amazon at 
Sterling’s first book, Lose Weight Save Money, can be 
An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. Click the link to choose the 
Jim’s book – A Social Security Owner’s Manual, is now available on Amazon. Click this link for the 
And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.