To help you get the most out of your IRA investments, Beck & Lenox Estate Planning and Elder Law offers Kiplinger’s recent article entitled “Don’t Make These Common IRA Mistakes” . Avoiding common IRA blunders may impact your financial future in a significant way.
Not Planning for the “Second Half”. It’s really about two halves. You accumulate wealth in the first half and withdraw it in the second. Many people only play the first half of the game: they focus only on saving as much as possible in their IRA. However, with retirement saving, it’s not how much you have. It’s how much you can keep after taxes.
Converting to a Roth All at Once. If you think your tax rate will be higher when you retire than it is right now, converting a traditional IRA to a Roth IRA this year might be smart. In the end, the total tax you owe on those funds may be lower by taking that step. However, a Roth conversion has a tax bill on your next return. The “mistake” those people sometimes make is thinking they have to convert the entire account at once. Instead, you can do partial conversions.
Exceeding Roth IRA Income Limits. There are annual contributions limits for both traditional IRAs and Roth IRAs. However, for Roth IRAs only, there are also income limits. If you’re single, the amount you can contribute to a Roth IRA in 2022 is gradually reduced to zero, if your modified adjusted gross income is between $129,000 and $144,000 ($204,000 to $214,000 for joint filers).
Doing Indirect Rollovers. Many people have trouble when they attempt to move money from one retirement account to another. If you take money out of an IRA and the check is in your name, you only have 60 days to roll that money over into another retirement account before the withdrawn funds are deemed taxable income. This is an indirect rollover. For IRA-to-IRA transfers, you can only do one indirect rollover per year.
Forgetting to Account for All RMDs. You must start taking required minimum distributions (RMDs) when you reach 72. Some people miss an RMD or don’t take it for all of their accounts subject to the RMD rules. Other people miscalculate and don’t withdraw enough money. These can be costly mistakes, because you could be hit with a stiff penalty for violating the RMD rules.
Educate yourself and use the services of your financial advisor or estate planning attorney for help in avoiding common IRA blunders. As you are closing in on retirement or are already there, you do not want to cause a loss in assets. To make sure you are protected, especially where your estate planning is concerned, contact Beck & Lenox for a complimentary phone consultation with one of our attorneys. You can schedule the call online, or by calling our office at 636-946-7899.
Reference: Kiplinger (July 25, 2022) “Don’t Make These Common IRA Mistakes”