IRA Planning

IRA Planning – What Now with New Tax Laws?

Change, as annoying as it can be, is inevitable and so we must be proactive in dealing with it. This is especially true as it pertains to our finances.

For most investors, qualified tax-deferred accounts (IRA’s, 401k’s, etc) are where the majority of their retirement assets are held. In that regard, there have been recent changes in the tax laws that should be analyzed for their impact on the future of your retirement plan. Furthermore, possible legislation like the “Secure Act” could further change implications to these types of accounts but we’ll address that in a separate publication.

Specifically, there are some IRA ideas on the individual (non-corporate) side that should be considered given these changes.

  1. Deductibility of IRA management fees:

Advisor fees may be deductible on an itemized basis depending on the type of fee. Fee-based investment management fees could be deductible subject to your AGI. However, fees paid for fee-only, advice-only, fee-for-service planners/advisors generally are not deductible. The costs of transactions and the financial products themselves are not deductible on an itemized basis. Your CPA can help you with this so you know what’s deductible and what’s not as well as the best place(s) from which to pay fees for particular types of accounts (IRA vs Non-IRA).

  1. Roth Conversions:

This can be substantial if you miss it. You can no longer reverse or re-characterize Roth conversions. Once a conversion is done, it’s done! Gone are the days of seeing your tax bill the following year and deciding to reverse the decision.

This is not to say that Roth conversions are a bad idea. On the contrary, an effective Roth conversion strategy could be more attractive now than ever due to low tax rates and larger standard deductions.


  1. Qualified charitable distributions (QCD):

This one applies for those already over 70.5 years of age. For many, charitable gifts will no longer be deductible because taking the larger standard deduction will be more advantageous than itemizing. However, you can still effectively get the deduction by not only taking the new, larger standard deduction but also making charitable donations by way of QCD, which is excluded from income.

A QCD must be a direct transfer from the IRA to the charity, can be up to $100,000 per person and meet the RMD requirements for IRA’s. The charity must also be an eligible entity. The QCD does not increase Adjusted Gross Income for tax purposes like an IRA distribution does. As a result, charitable giving can be done without affecting Social Security benefits and Medicare premiums. 

  1. Required Minimum Distribution (RMD) Planning:

It is very important to make sure that you are meeting your RMD obligation annually from your IRA’s. Remember, there is a 50% penalty imposed for missing an RMD. That is substantial!

RMD planning can apply to those IRA owners that are over 70.5 but could also apply to younger beneficiary IRA and beneficiary Roth IRA owners depending on the situation. Pending legislation could change the RMD start age but that remains to be seen for the moment.

For those over 70.5, the QCD mentioned above is a good way to help meet those obligations. RMD’s for those who own multiple IRA accounts can be aggregated and pulled from one single account, if desired, and must be pulled by year-end unless it’s your first RMD year.

First-year RMD’s can be deferred till April 1st of the following year but then must be taken in conjunction with the current year’s obligation thus doubling the RMD for that year.

Don’t wait till tax time next year to review your strategies and figure out what changes (if any) need to be made. There is no time like the present to make adjustments and get prepared.

We can help coordinate and implement the items mentioned here with the rest of your overall retirement strategies. We are happy to help so just give us a call and book your no-obligation review today. We look forward to meeting you!

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