IRA Rules

Archive for May, 2010

Question: IRS Rules about substantially equal premature IRA withdrawals???

Hypthetical situation: I’m 45 and have enough money in my Roth IRA to retire. Is it really as simple, as using the Life Expectancy table and dividing my balance by that number each year to withdraw from my Roth so I can never work again? No penalty for early distribution, and no taxes since it is a Roth?

Answer: That is generally correct. Of course, with IRS rules there are additional hoops to go through.

Read the details in IRS Publication 590 (Individual Retirement Arrangements), Roth IRAs, starting with “Are Distributions Taxable?” (starting on p. 65)

http://www.irs.gov/pub/irs-pdf/p590.pdf

Should You Convert Your IRA To A Roth IRA?

Sean Keogh (32CSM) interview on radio about orange marches

Question: When do the 15% capital gains rate, marginal rate reductions, and the IRA to employer rollover rules expire?

1. The marginal rates for the various tax brackets were lowered temporarily lowered several years ago, for example, the 28% bracket became the 25% rate. When does this expire and the rates return to normal?
2. At one time, long term capital gains were taxed at a 20% rate. This was temporarily lowered to 15%. When does this expire and the rate return to 20%?
3. At one time, you could roll over money from an employer plan (401k, etc.) to an IRA, but not from an IRA to an employer plan. Now, you can. Is this change permanent? If not, when does it expire?

Answer: 1. Originally 2005.Now 2010.
2. Originally 2008, now 2010.
3. I don’t know.

All dates are moving targets. The government actually likes to wait until the last minute to “extend” or “patch” legislation as they can use old income projections to balance the budget. When they lower taxes, they are supposed to a) reduce spending or b) increase taxes on someone else to balance the budget. By waiting until it’s politically expedient to do so, they can skirt the paygo rules.

Reeling in the Years 1993-2