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Here at Chadmere Capital Inurance and Financial Services, 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.

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IRA DISTRIBUTIONS AND ROTH RECHARACTERIZATIONS: TODAY’S SLOTT REPORT MAILBAG

By Andy Ives, CFP®, AIF®
IRA Analyst

Question:

I recently retired and I plan to relocate to Tennessee. I would like to purchase a new home. Can I pull funds from my IRA to do so, and what would be the implications? Thank you.

Edna

Answer:

Edna,

If you are over 59 ½, you have full access to your IRA dollars with no strings attached – other than having to pay taxes on the distribution. If you want to withdraw some dollars to buy a new home, then go for it. However, if you are under age 59 ½, then there would be a 10% penalty on any early IRA distribution (plus taxes due) unless an exception existed. There is an exception for a first-time home buyer. A “first-time home buyer” doesn’t necessarily mean this is the first home you have ever purchased. It means you (and your spouse, if married) did not own a principal residence within the previous 2 years. Be aware that the lifetime first-time home buyer distribution is limited to only $10,000.

Question:

Dear Sir,

In 2020, I converted $20,000 from a Traditional IRA to a Roth IRA. Can I recharacterize that amount from the Roth IRA back to a Traditional IRA? I appreciate your help.

Answer:

Unfortunately, Roth conversions can no longer be recharacterized (undone). The $20,000 will be reported as taxable income for 2020 – there is no reversing the transaction.

https://www.irahelp.com/slottreport/ira-distributions-and-roth-recharacterizations-todays-slott-report-mailbag

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