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TAX SEASON | ROTH-O-MANIA

TAX SEASON | ROTH-O-MANIA

March 16, 2023

Roths are the theme lately, and we are here to give you the A, B, & Cs. The SECURE ACT 2.0 has brought even more attention to Roths; funding a Roth(s) has many advantages, and we want you to know them all. Again, Ed Slott and Company, LLC has provided more valuable information I can leverage to benefit our readers and clients. If you need clarity, contact the DFG Team, we are here to help.

ROTH-O-MANIA!

SECURE 2.0 is now the law of the land, and one thing is obvious; Roth-O-Mania is here! In their quest for more revenue, Congress has created more options to save with Roth accounts. These accounts bring in the immediate revenue that Congress desperately needs. For retirement savers, these Roth options offer the promise of potential tax-free earnings and withdrawals down the road.

Here are 5 new Roth savings opportunities brought by SECURE 2.0:

  1. Roth SEPs and SIMPLEs. Beginning in 2023, SEP and SIMPLE plans can allow Roth contributions. This new rule is great news if you are a small employer. Now, these easy and inexpensive retirement plans can offer a Roth option. You may need to be patient here. The logistics involved in getting SEP and SIMPLE Roth plans off the ground likely will mean that custodians will not have these options immediately available.

 

  1. Roth Employer Matches. Before SECURE 2.0, employer-matching contributions to a plan were made on a pretax basis. The new law changes this and allows plans to offer employees the option of having matching contributions made to a Roth account. If your employer makes a Roth matching contribution, you will pay income tax; this provision is effective for 2023.

 

  1. Rollovers from 529 Plans to Roth IRAs. SECURE 2.0 allows rollovers from 529 plans to Roth IRAs. This provision will be in effect in 2024 and may be a good opportunity if you have concerns about what to do with funds left over in a 529 plan. Leftover 529 funds can now be rolled over to a Roth IRA in the name of the 529 beneficiary. However, there are restrictions. For example, the 529 plan must have been in place for 15 years, annual rollovers cannot exceed the annual Roth IRA contribution limit, and total lifetime rollovers cannot exceed $35,000.

 

  1. No Lifetime RMDs for Roth plans. Unlike Roth IRAs, Roth accounts in workplace plans have been subject to RMDs during the owner’s lifetime. Beginning in 2024, this will no longer be the case: your Roth plan dollars will be excluded from the RMD calculation.

 

  1. More Roth Catch-Up Contributions. As you get closer to retirement, the rules allow you to increase your retirement plan contributions. Starting in 2024, if you are of higher income, age-50 or older, and want to make catch-up plan contributions, you must make them as Roth contributions.

 

~By Sarah Brenner, JD, IRA Analyst

 

Copyright © 2023, Ed Slott and Company, LLC

Reprinted from The Slott Report, January 23, 2023, with permission.

https://www.irahelp.com/slottreport/roth-o-mania

Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.

 

To help you understand the A, B, & Cs of Roths, please get in touch with the DFG team. We aim to help you grow your money, not give it to the IRS. During this tax season and to better serve you, we have provided a link below called the 2022/2023 TAX SEASON GUIDE; click on the link to learn more. Dixon Financial Group cannot give tax advice. Still, we are here to guide you through the process regarding your investments and provide suggestions now to help reduce your tax liability in the future. Please call the DFG Team so we can answer your questions, and let us be a part of your tax-saving retirement journey.

2022/2023 TAX SEASON GUIDE

David S. Dixon, CFP® 

Jacob S. Bierstedt, CFP®, ChFC®

Dixon Financial Group, LLC, and LPL Financial do not provide tax advice or tax services. We suggest you discuss your specific tax issues with a qualified tax advisor. Copyright © 2023, Ed Slott and Company, LLC- Reprinted with permission. Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.