The IRA Rules Are Tricky (What You Need To Know)

You are receiving this email because you signed up to receive Bob Carlson's free e-letter Retirement Watch Weekly, or you purchased a product or service from its publisher, Eagle Financial Publications. [Carlson's Retirement Watch Weekly] [Retirement Reports](www.retirementwatch.com/retirement-resources/) [Retirement Articles](www.retirementwatch.com/retirement-articles/) Brought to you by Eagle Financial Publications The IRA Rules Are Tricky (What You Need To Know) by Bob Carlson Editor, [Retirement Watch]( 07/02/2023 SPONSORED [Tin Company With High-Quality Portfolio Poised For Growth!]( [image]( Investors - This Tin Company Has A High-Quality Portfolio of Tin, Tin/Tungsten and Lithium Projects in the Tier 1 Mining Jurisdiction of Tasmania and New South Wales, Controlling Some of the Most Important Tin Districts in Tasmania. With Tin Demand on the Rise and Supply Constrained, this Company is Poised for Growth! [Click to read more and ADD THIS COMPANY TO YOUR WATCHLIST!]( [CLICK HERE...]( Fellow Investor, [Bob Carlson]In last week’s Retirement Watch Weekly, I shared some oversights and missed opportunities that can easily trigger unnecessary taxes. I get a lot of reader questions about IRAs and taxes, so to help all of us get on the same page, let's today cover more costly mistakes to recognize and avoid… Non-traditional investments Some assets can’t be owned by IRAs. Other assets can be owned only in some circumstances. What's more, there are prohibited transactions regarding retirement accounts you must be aware of. And the details of these rules are tricky. For example, your IRA can own real estate, but not if there’s a mortgage or other debt involved. Your IRA can own a small business, but not if it pays you a salary or other compensation. Don’t add unconventional investments or strategies to your IRA without good advice or studying the rules very closely. Charitable giving opportunities Charitably inclined people often leave a lot of money on the table by not making their gifts through IRAs. There are benefits for gifts made both during life and through your estate. The qualified charitable distribution (QCD) for IRA owners at least age 70½ has been permanent since 2015. Eligible IRA owners can direct their custodians to distribute money to the charity or charities of their choice. The donations up to $100,000 annually aren’t included in gross income, and the IRA owner doesn’t receive a deduction. The QCD counts toward any RMD for the year. For those who are charitably inclined, it’s probably the best way for someone age 70½ or older to make charitable donations. When you plan to make donations through your estate, consider naming the charities as IRA beneficiaries instead of giving other assets in your estate. The charity takes the distribution from the IRA. Neither it nor the estate owes income taxes. When individuals, such as your spouse or children, inherit an IRA, the distributions are taxable to them in the same way they would have been taxable to you. But when they inherit non-IRA assets, they increase the tax basis to the current fair market value. They can sell appreciated assets and not owe any income taxes. [Have You Heard of the Retirement “Dead Zone?”]( [image]( The 2020s are set to become the WORST DECADE FOR RETIREMENT in American history. Yeah, it’s bad news… But the good news is that my brand-new book details all the tools you’ll need to live an amazing retirement, regardless of what happens with inflation, the stock market or Fed interest rates. For a limited time, my new book is available at no charge, but the only way to get a copy… [is through this link.]( [CLICK HERE...]( RMD errors A few years ago, the IRS decided to examine Required Minimum Distributions (RMDs) more closely, because people make a lot of errors with them. When you don’t take an RMD, the penalty is 50% of the amount that should have been distributed as an RMD but wasn’t. Some people don’t know about Required Minimum Distributions, so they don’t take them. Many others miscalculate their RMDs or don’t optimize the way they take RMDs. Waiting too long to plan for RMDs Some people have large IRAs they consider to be primarily emergency funds and money to be left to their heirs. Often these people are surprised at how RMDs escalate over the years. The percentage of the IRA that must be distributed increases each year. This triggers higher income taxes that could have been avoided. If you have a large IRA, plan for RMDs early. Though RMDs aren’t required until age 72, the earlier you plan how to deal with a large IRA and its future RMDs, the more options you have. Among the strategies we’ve discussed in the past are emptying the IRA early, converting to a Roth IRA, buying qualified longevity annuity contracts, using the IRA to establish a family bank and turning the IRA into a charitable remainder trust. Avoiding the 10-year rule The Setting Every Community Up for Retirement Enhancement Act enacted at the end of 2019 ended the Stretch IRA. Now, most non-spouses who inherit an IRA must distribute the entire IRA within 10 years. Even Roth IRAs must be depleted within 10 years. This means the tax-deferred compounding of the IRA can’t be extended for decades. The beneficiaries must pay income taxes on distributions from traditional IRAs within 10 years. That often results in higher lifetime income taxes than when the distributions could have been stretched out over a longer period. Fortunately, many of the strategies for reducing taxes on lifetime RMDs also are ideal strategies for planning around the 10-year rule and the end of the Stretch IRA. You can empty the IRA early, convert a traditional IRA to a Roth IRA, or reposition the IRA as a charitable remainder trust or a permanent life insurance policy. To a better retirement, [Bob Carlson] Bob Carlson Editor, Retirement Watch Weekly Editor’s Note: Converting a traditional IRA to a Roth IRA is one of today's most powerful legal loopholes in retirement planning. Yet so little information is out there for the public to understand. That’s why I’ve created The Retirement Watch IRA Conversion Calculator. It will help you figure out how the different variables may change the results of a conversion – and lets you customize estimates for your unique situation or a range of possible situations. It takes careful analysis to make the right choices, and my calculator is specifically designed to help you make these important decisions. 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Popular Posts: [The Overlooked Retirement Time Bomb]( [Understanding Rules of IRA Contributions]( [Strategies to Reduce Alternate Minimum Tax]( [Avoiding Expensive IRA Mistakes]( New to the Retirement Watch Community: SeniorResource.com Gail from Dallas writes: I am finding out that my company’s group health plan is not paying for any Medicare Part B medical expenses since my husband and I are not actually married. We have been together for over 25 years, but never officially tied the knot. Richard is 72 and I am 58. Now I am discovering that the group health plan does not recognize “domestic partners” as married couples, because there is no marriage license. Richard needs to enroll in Medicare Part B. Being 72, if he does not do this properly, the penalty will go back 7 years. This could be a 70 or 80% lifetime penalty. The bottom line is, we need HELP!! [Click here to find out the solution.]( About Bob Carlson: [Bob Carlson]Robert C. Carlson is the author of the books The New Rules of Retirement and Retirement Tax Guide, editor and investment director of the popular retirement newsletter, Retirement Watch, and editor of the free weekly e-letter, Retirement Watch Weekly. Bob is a frequent speaker at investment conferences around the country, and you can also hear Bob as a featured guest on nationally-syndicated radio shows, such as The Retirement Hour, Dateline Washington, Family News in Focus, The Michael Reagan Show, Money Matters and The Stock Doctor. To ensure future delivery of Eagle Financial Publications emails please add financial@info2.eaglefinancialpublications.com to your address book or contact list. View this email in your [web browser](. This email was sent to {EMAIL} because you are subscribed to Dividend Investor Daily. To unsubscribe please click [here](. If you have questions, please send them to [Customer Service](mailto:customerservice@eaglefinancialpublications.com). 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