IRA Planning

2020 brought in new rules for IRA planning. While they do not affect everyone, they do affect many people who have done well during their life. Many individuals are concerned about how to leave these qualified tax-deferred accounts to their beneficiaries. Your current strategy may have been a Legacy IRA.

IRAs are usually the first and the last steps of retirement planning

The first step is to understand and identify what IRA you have and how it has been affected, or which one meets your goals. There are various kinds of IRAs with different rules and benefits.

Set up your IRA:

What kind of IRA best suits my needs? Traditional IRA or Roth IRA?
Traditional vs. Roth IRA comparison chart
You can set up an IRA with a:
- bank or other financial institution
- life insurance company
- mutual fund
- stockbroker

Types of IRAs

A traditional IRA is a tax-advantaged personal savings plan where contributions may be tax deductible.
A Roth IRA is a tax-advantaged personal savings plan where contributions are not deductible but qualified distributions may be tax free.
A Beneficiary IRA
A Rollover IRA https://www.irs.gov/pub/irs-tege/rollover_chart.pdf

Why roll over?

When you roll over a retirement plan distribution, you generally don’t pay tax on it until you withdraw it from the new plan. By rolling over, you’re saving for your future and your money continues to grow tax-deferred.

If you don’t roll over your payment, it will be taxable (other than qualified Roth distributions and any amounts already taxed) and you may also be subject to additional tax unless you’re eligible for one of the exceptions to the 10% additional tax on early distributions.

How do I complete a rollover from my Employer-Sponsored Plan to an IRA?

Direct rollover – If you’re getting a distribution from a retirement plan, you can ask your plan administrator to make the payment directly to another retirement plan or to an IRA. Contact your plan administrator for instructions. The administrator may issue your distribution in the form of a check made payable to your new account. No taxes will be withheld from your transfer amount.
Trustee-to-trustee transfer – If you’re getting a distribution from an IRA, you can ask the financial institution holding your IRA to make the payment directly from your IRA to another IRA or to a retirement plan. No taxes will be withheld from your transfer amount.
60-day rollover – If a distribution from an IRA or a retirement plan is paid directly to you, you can deposit all or a portion of it in an IRA or a retirement plan within 60 days. Taxes will be withheld from a distribution from a retirement plan (see below), so you’ll have to use other funds to roll over the full amount of the distribution.