A Safer Retirement and Environment – What We’re Implementing to Help Keep You Safe: READ MORE

Here at Donato Wealth Management, we are adhering to state and local guidelines in order to protect both the health and safety of clients and staff. Keeping our clients and staff safe is our highest priority and we’re taking all appropriate measures to ensure a safe environment. Should you prefer to not meet face-to-face, we are continuing to serve our clients through virtual settings such as Zoom or phone calls.

We look forward to continuing to help individuals and families achieve their ideal retirements.

Donato Wealth Management
(512) 833-6557

CLOSE

BUILD BACK BETTER AND THE RULE OF 55: TODAY’S SLOTT REPORT MAILBAG

By Sarah Brenner, JD
Director of Retirement Education

Question:

Ed,

Since the Build Back Better bill is still in legislative limbo, does that mean that backdoor Roth IRA contributions are still available for 2022? If so, what do you suggest if someone makes a backdoor Roth contribution early in 2022 and then the legislature retroactively disallows it when the bill is finally passed?

Thanks,

Ralph

Answer:

Hi Ralph,

As the final hours of 2021 tick away, it is now clear that the Build Back Better legislative proposal that included the elimination of the backdoor Roth IRA conversion will not become a reality this year. This means that back door Roth IRA conversions will still be available for 2022.  Will this proposal ever become a reality? No one really knows. It is highly unlikely, however, that any law eliminating back door Roth IRA conversions that is passed in 2022 would be retroactive or even effective for 2022. There would be too much confusion. If anything passes, which is still uncertain, it would likely be effective for 2023 at the earliest.

Question:

I read an article on your website and I had a question that I haven’t seen published before.

Let’s say I resign from a company at age 53 and leave my 401k with them.  Can I begin withdrawing from that old 401k plan at age 55?  Or, is the rule you have to be employed with that company the year you turn 55, announce you are retiring, then begin distributions?

Thanks

Kevin

Answer:

The rule of 55 can be tricky. This rule allows an exception to the 10% early distribution penalty that usually applies to distributions taken from employer plans prior to age 59 ½. Your question addresses a common area of confusion. To take advantage of the age 55 exception, you must separate from service in the year you reach age 55 or older. If you separate from service before then, you cannot use the exception. It is the age at separation that matters, not the age at the time of the distribution. In your situation, because you resigned when you were age 53, you cannot use the exception, even though you plan to take distributions at age 55.

https://www.irahelp.com/slottreport/build-back-better-and-rule-55-todays-slott-report-mailbag

Ready To Take

THE NEXT STEP?

 

For more information about any of our products and services, schedule a meeting today.

Or give us a call at (512) 833-6557

Investment advisory services are offered through Foundations Investment Advisors, LLC and is a SEC registered investment advisor.

Investment advisory services are offered through Donato Wealth Management and is a SEC registered investment advisor.