Monday, January 24, 2011

Are You an IRA Expert?

Welcome to this month’s installment of Are You an IRA Expert? Always thought you knew more than the next guy about IRAs and retirement accounts? Well now's your chance to prove it. Below are three questions, ranging from beginner to expert. Test your IRA skills by trying to get all three right!

Use the following information to answer the questions below:

Beginner: What is the last day to make a 2010 IRA (or Roth IRA) contribution?

Intermediate: If you took a distribution of $10,000 from your IRA on December 9, 2010 and rolled over that $10,000 to your Roth IRA today (January 24, 2011), in what year was your conversion made?

Expert: If you make a Roth IRA contribution on January 24, 2011 for 2010, when have you met the 5-year part of the rules for qualified distributions?


Beginner: 2010 IRA (and Roth IRA) contributions may be made up until the filing deadline for your tax return, not including extensions. So for a 2010 IRA contribution, you have up until April 15, 2011 to make the contribution.

Intermediate: Your conversion would be a 2010 conversion. The year of a Roth conversion is determined by when funds leave the distributing account, not when they are received. Keep in mind though, that for any distribution that is payable to you, the 60-day rules will apply.

Expert: The five year portion of the rules for qualified distributions would be satisfied after December 31, 2014. Since the contribution was made for 2010, the 5 year clock actually begins ticking on January 1, 2010 - even though the contribution was really made more than a year later on January 24, 2011. In essence, by making a contribution now for 2010, you can turn the 5 year rule into a 4 year rule.

So how’d you do? Are you an IRA Expert? Unless the answer is a resounding yes, you may want to consider consulting with an advisor who has specialized knowledge and training in this area when you have these, or other IRA questions.

By IRA Technical Consultant Jeffrey Levine and Jared Trexler

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