Radio Caller Questions: IRA Q&A

Retirement, Income, Tax & Estate Planning.

Radio Caller Questions: IRA Q&A

July 9, 2015 Investing Retirement Planning 0

Every week we get a number of email questions that we try to answer on the air (by the way, you can now hear us on WNTP 990AM on Saturdays at 8 a.m. along with our usual spot on Sundays at noon). Below are a few of the more interesting ones we’ve received lately. If any of these questions open up more questions for you, don’t hesitate to give me a call or shoot me back an email.


 

RETURN THE SAME ASSETS IN AN IRA ROLLOVER

I need some extra cash for a short time so I would like to take some stock from my IRA (it’s all in securities), sell the shares and then return the cash to the IRA within 60 days. Can I do that?

Nope!!! For a 60-day, IRA-to-IRA rollover, you must return the same assets to the same IRA or to another IRA. For instance, if you take 1,000 shares of ABC stock worth $10,000, you must return the 1,000 shares of ABC to the IRA. And it doesn’t matter if the 1,000 shares of ABC stock have increased or declined in value – you must return the 1,000 shares. Otherwise, the withdrawal will be considered a taxable distribution even if the rollover takes place within 60 days. If you really need the cash for 60 days, sell the shares within the IRA and then withdraw the cash. Also, beware of the new restrictions on 60-day rollovers.

Don’t we love the IRS?


 

NO AGE LIMIT FOR ROTH CONVERSION

I no longer have earned income. Can I convert part of my traditional IRA to a Roth now that I’m older than 70 ½?

Yes. You can convert to a Roth at any age. You don’t need earned income to convert, only to make a direct contribution. You will need to pay income tax on the amount you convert. (Part of the conversion could be tax free if you made nondeductible contributions to your traditional IRA.) Because you’re older than 70 ½, you will need to take your required minimum distributions for the year before you convert any assets and the RMD cannot go into the Roth. After the conversion, the money in the Roth will grow tax free, and you will not be required to take distributions from the Roth.


 

WHEN A CHARITY AND CHILDREN INHERIT A SINGLE IRA

I would like to name my two sons and a charity as equal beneficiaries of my IRA. Can I do this?

You can, but you should advise your sons of the steps they will need to take after you die. Direct your sons to be sure the charity takes its share by September 30 of the year after you die. If they don’t, your sons will be required to withdraw their portions of the IRA within five years after you die. If the charity gets its share by September 30, your sons will be able to take required minimum distributions over their life expectancies, allowing the IRA to grow tax-deferred, perhaps for decades. Each son also should put his share of the IRA into an individual inherited IRA.