By Sarah Brenner, JD
Director of Retirement Education
Thanksgiving 2021 is upon us. This is the time of the year when we gather together and express our gratitude. When it comes to our retirement accounts, we often complain about the negatives. There are restrictions that are not logical and rules that are complex and confusing.
To celebrate Thanksgiving, it is a Slott Report tradition to change it up and take a few moments to give thanks for the IRA rules that do work well and help us save for our families’ futures.
Here are 5 IRA rules for which we are thankful:
1. Portability. The days of staying in one job for lifetime and retiring with a pension are long gone. Nowadays people change jobs frequently. We give thanks for the rules which recognize the increased mobility of the workforce and allow more portability between retirement plans. Rollovers from plans to IRAs, and trustee to trustee transfers between IRAs, allow us to protect and maximize our retirement savings.
2. Roth IRA distributions. The Roth IRA is one of the best tax breaks out there. If you follow the rules, you can take tax-free distributions of years of accumulated earnings. What’s not to like? For these accounts, we are grateful.
3. Qualified charitable distributions (QCDs). Being charitably inclined is a good thing! We give thanks for QCDs which encourage gifts to charity by allowing tax-free transfers of IRA funds to charities. We are also grateful for the added benefits of QCDs. They not only decrease adjusted gross income, but also can satisfy the year’s required minimum distribution requirement.
4. Breaks for spouse beneficiaries. Being married has its benefits under the tax code when it comes to IRAs. We are thankful for the special breaks available to those who are married, such as spousal IRA contributions and the ability to do a spousal rollover as a beneficiary.
5. Roth IRA conversions. A Roth conversion gives an IRA owner the opportunity to trade a tax bill now for the payoff of tax-free earnings in the future. With the current low tax rates this is a deal that many have been eager to take. We are grateful for this strategy which allows for a more secure retirement by reducing concerns about rising taxes.
Happy Thanksgiving from all of us at the Slott Report!