QUESTION:

I understand that the SECURE Act 10-year payout rule applies to certain beneficiaries. I also understand that, if the IRA owner died after his required beginning date (RBD), annual required minimum distributions (RMDs) must be taken during the 10-year period. My question is whether we use the life expectancy of the IRA owner or the beneficiary to calculate these RMDs?

Thank you,

Bill

ANSWER:

Hi Bill,

You are correct that annual RMDs must be taken during the 10-year payout period when the IRA owner dies after the RBD. Those annual RMDs are based on the beneficiary’s life expectancy.

QUESTION:

First, you all are fantastic, and I appreciate your insights and information.

My question relates to the beneficiaries of a Roth IRA.

If the IRA owner completes a conversion to her first Roth account and dies before the five-year holding period is over, do the beneficiaries have any problems with receiving the earnings in their inherited Roth account tax free?

Thank you,

Tom

ANSWER:

Hi Tom,

Thanks for the kind words!

There is good and bad news when it comes to inherited Roth IRAs and the five-year holding period for qualified tax-free distributions of earnings. The bad news is that the holding period does apply to inherited accounts. The good news is that it starts with the Roth IRA owner’s first contribution. It does not restart for the beneficiaries. The beneficiaries would need to wait out whatever is left of the Roth IRA owner’s five-year holding period, but after that all earnings would be tax free.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

Believe it or not, you still have some time if you are having second thoughts about that IRA contribution you made for 2025. Maybe you made a Roth IRA contribution and then discovered your income was too high. Maybe you made a traditional IRA contribution, but you were ineligible due to having no earned income. Maybe you made a 2025 contribution but changed your mind. There is good news if you act quickly. You can correct 2025 IRA contribution errors by the upcoming October 15, 2026, deadline.

October 15, 2026 – Correction Deadline

When it comes to the timing for correcting a contribution, the key deadline is October 15 of the year following the year for which the excess (or unwanted) contribution is made. The statutory deadline is actually the tax-filing deadline including extensions. However, the IRS has said that the applicable deadline for taxpayers who file a timely return is six months after the due date for filing the tax return, excluding extensions (i.e., October 15 of the year following the year for which the contribution was made).

Why is this date so important? A 6% penalty applies to excess contributions that are not corrected by the deadline. This penalty is not a one-and-done thing. It will apply every year that an excess contribution remains in your IRA. The only way to avoid the 6% penalty when an excess contribution occurs is to correct it by the October 15 deadline. Also, if you are just changing your mind about a contribution that you are actually eligible to make, your ability to correct the IRA contribution will end with the October 15 deadline.

Withdrawal or Recharacterization

When you correct an IRA contribution before the deadline, you have two choices when it comes to fixes. You can recharacterize the contribution or withdraw it. With either option, the slate is wiped clean, and the contribution is treated as though it had never been made to the IRA where the excess occurred.

With both choices, the net income attributable (NIA) must accompany the contribution, either when it is recharacterized or when it is withdrawn. The NIA can be a loss if the IRA has lost value. The calculation of the NIA is based on the entire value of the IRA during the time the contribution was in the IRA. The NIA is calculated using a special IRS-approved formula. Many times, the IRA custodian will do the calculation for you. A worksheet with the formula can also be found in IRS Publication 590-A.

One option for correcting an IRA contribution is withdrawal. Be sure to tell the IRA custodian that the distribution is a return of an excess contribution. With this method of correction, the contribution and the NIA are distributed. The contribution is not taxable. However, the earnings are taxable in the year in which the contribution was made. Thanks to the SECURE 2.0 Act, these earnings are not subject to the 10% penalty, regardless of your age. The IRA custodian will use special reporting on Form 1099-R to reflect that this is a corrective distribution before the deadline.

Recharacterization is often overlooked as a strategy to fix excess contributions. Recharacterization is a way to move an unwanted tax-year contribution from a traditional IRA to a Roth IRA, or vice versa. If a contribution is recharacterized, it will move from one type of IRA to another in a reportable nontaxable transfer. The contribution will be treated as though it had been originally made to the IRA to which it is recharacterized. Recharacterization is a very useful tool. However, it does have its limits. A contribution cannot be recharacterized from one tax year to another.

Correcting IRA contributions can be complicated. Be sure you get it right by seeking the advice of a professional tax or financial advisor.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

In our August 31, 2026, Slott Report entry, we offered a list of situations where Roth conversion could make sense. In that article, we also said that a Roth conversion is not for everyone. Conversion is NOT a universally beneficial transaction, so each scenario must be evaluated individually. We all have different opinions and financial goals. While a Roth conversion could make sense for one person, it might not be the best way forward for another. To help with the decision, here is a list of situations where a Roth conversion may not be the ideal way forward.

1. Seniors who need the money. A Roth conversion of either an IRA or workplace plan will generate an increased tax bill for the year of the conversion. Anyone living on a fixed income must be careful when adding to their expense list. No one should go broke converting if the funds needed to live on must be sent to the IRS to cover the elevated tax bill.

2. Those who believe they will be in a much lower tax bracket in retirement. Why convert at a higher tax bracket when you know you will be taking distributions in the future at a lower bracket? Sure, the earnings would be tax-free after a conversion, but the long-term tax impact of a conversion must always be considered.

3. Those who just cannot bring themselves to pay the tax now. Delaying taxes for as long as possible is the mindset of many people. A Roth conversion flies in the face of that belief. A Roth conversion increases ordinary income for the year of the conversion, potentially causing the loss of valuable tax credits and deductions, taxation of Social Security, and increased IRMAA surcharges. While this only happens for the year of the conversion, such an expedited route to a higher tax bill (and the potential collateral consequences) is a bridge too far for some.

4. Those who do not have non-retirement assets to pay the tax on the conversion. We believe that it is typically best to pay the taxes due on a Roth conversion from another source of funds (as opposed to having taxes withheld from the IRA on the conversion). Having taxes withheld from the IRA leaves less funds available for tax-free accumulation. Also, it’s important to note that IRA owners under age 59½ should almost never have the taxes withheld from the IRA on a conversion. Why? Taxes withheld are a withdrawal and are not part of the conversion. For a person under 59½, this is an early withdrawal, and there would be a 10% penalty on the tax dollars that are being sent to the IRS!

5. Anyone who asks how soon they can take the money out. This is a red flag. If a person needs the money immediately, why convert to a Roth? Anyone over 59½ will have immediate access to the converted funds, but for those under 59½, there is a 5-year wait before converted dollars can be withdrawn without penalty (assuming no exception applies).

6. Those who have a charity named as their IRA beneficiary. Charities do not have to pay income tax when they inherit a traditional IRA, so why would the IRA owner want to pay the income tax on a Roth conversion? Charities don’t care if they receive a traditional IRA or a Roth IRA. From a tax perspective, it’s all the same to them.

7. Anyone receiving financial aid based on income. An income spike could disqualify a person from whatever financial aid they may be depending on. A Roth conversion could push them over the eligibility threshold for receiving that aid.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

QUESTION:

I am age 74 and inherited both a traditional IRA and a Roth IRA from my older sister who recently died. Can I do a conversion from the inherited IRA into the inherited Roth IRA?

Daniel

ANSWER:

Daniel,

Non-spouse beneficiaries like yourself cannot convert an inherited traditional IRA to an inherited Roth IRA. However, if you have your own traditional IRA (not inherited), you could do Roth conversions with that account and take withdrawals from your inherited traditional IRA to help cover the taxes due.

QUESTION:

I inherited a Roth IRA from my brother who was seven years younger than me. I understand that I can choose either the 10-year rule or the stretch. Can I use my brother’s age to determine the annual required minimum distributions (RMDs) if I choose the stretch?

Thanks,

Jeremy

ANSWER:

Jeremy,

Since you qualify as an eligible designated beneficiary (EDB) under the “not more than 10 years younger” category, you are correct that you can choose either the 10-year rule (with no annual RMDs) or the full stretch (with annual RMDs) on this inherited Roth IRA. If you elect annual RMDs, you must use your own age from the IRS Single Life Table. Start with your age in the year after the year of death to determine your initial RMD factor. Then, subtract 1.0 each year thereafter.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

A Slott Report article from April 20, 2026, reported that a number of states intended to tax Trump accounts less favorably than they are taxed under the federal tax code, and others were undecided about state tax treatment. Since then, several states have changed their minds and will adopt the federal tax treatment of Trump accounts. In addition, several previously undecided states have decided to do the same thing.

As a reminder, four types of contributions to Trump accounts are permitted:

(1) A one-time $1,000 federal government contribution for children born between 2025 and 2028;

(2) Individual contributions by parents, grandparents, or anyone else on behalf of a child, up to $5,000 for 2026;

(3) Contributions by employers for dependents of employees and employees themselves, up to $2,500 for 2026; and

(4) Contributions by tax-exempt organizations or any government.

For federal income tax purposes, Trump account contributions in categories (1), (3) and (4) are considered pre-tax contributions. So, taxation of those contributions and their earnings can be deferred until distribution. Individual contributions (category (2)) are considered after-tax contributions, so they are taxable in the year made. But taxation of earnings on those contributions is deferred until distribution.  

States aren’t necessarily required to adopt federal tax treatment of Trump accounts. If they do not, earnings on all types of contributions will be taxed at the state level annually. This will be confusing to residents because earnings will be taxed one way for federal taxes and another way for state taxes.

Here’s an updated list of how things currently stand:

• Nine states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming) don’t have state income tax, so this isn’t an issue if you reside there.
• According to the Tax Foundation, 20 states and the District of Columbia broadly match federal tax law. Those 20 states are: Alabama, Colorado, Connecticut, Delaware, Illinois, Iowa, Kansas, Louisiana, Maryland, Missouri, Montana, Nebraska, New Mexico, New York, North Dakota, Oregon, Rhode Island, Utah, Vermont and West Virginia. Those states will likely tax Trump account contributions like federal law does.

What about the remaining 21 states? 

• Ten states (Arizona, Arkansas, Idaho, Indiana, Maine, Minnesota, North Carolina, Ohio, Oklahoma and Virginia) have either said they will conform to federal tax law or have recently passed conformity legislation.
• Three states (California, Hawaii and Kentucky) previously said they wouldn’t follow federal law, but have since changed their minds.
• Four other states (Georgia, Michigan, New Jersey and Mississippi) apparently will follow federal law.
• This leaves four states (Massachusetts, Pennsylvania, South Carolina and Wisconsin) that continue to say they won’t recognize the federal tax treatment of Trump accounts.

Keep in mind that this list is still subject to change. The best way to know for sure how a particular state will tax Trump accounts is to contact the state tax office directly.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

Question:

Can I roll over my pre-tax 401(k) funds to a traditional IRA and my Roth 401(k) funds to a Roth IRA? I am concerned about the once-per-year rollover rule.

Thanks,

Ken

Answer:

Hi Ken,

I have good news for you. The once-per-year rollover rule only applies to traditional IRA-to-traditional IRA and Roth IRA-to-Roth IRA rollovers. It does not apply to rollovers of 401(k) (or other plan) funds to a traditional or Roth IRA. (It also does not apply to rollovers from IRAs to plans or to conversions of traditional IRAs to Roth IRAs.)

Question:

Should my daughter continue contributing to her son’s 529 plan or open up a Trump account? I said she should focus on the 529 plan. Tax-free beats tax-deferred all day long. Am I right?

Craig

Answer:

Hi Craig,

Most financial advisors and commentators agree that if a parent’s (or grandparent’s) goal is to save for the child’s college, contributing to a 529 plan is likely a better option than a Trump account. Parents can contribute more to a 529 plan than they can to a Trump account and can take state tax deductions in many states. However, although 529 funds come out tax-free if used for higher education, taxes and penalties do apply if the funds are used for other purposes. Even if your daughter’s savings are going to a 529 plan, it is still worth opening a Trump account if her son is eligible for the $1,000 Federal government contribution (i.e., born between 2025 and 2028) or for contributions made by an employer or charity. Don’t pass up free money!

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

Hurricane season is upon us. Wildfires are raging in the West, and many states are dealing with flooding from summer storms. Natural disasters are increasingly common. After the impact comes the cleanup…and the cost. While tapping a retirement account early is never ideal, for some victims of natural disasters there may be no other option to pay the resulting bills. Fortunately, the rules do offer some relief for these account owners.

Penalty-Free Distributions

A qualified disaster distribution from a retirement account is exempt from the 10% early distribution penalty. This includes a distribution made to an individual whose principal place of abode is in a federally declared disaster area and who has sustained an economic loss caused by the disaster. An individual who has not sustained an economic loss will not qualify for tax relief. The distribution must be taken within 180 days of the first day of the disaster (or, if later, the date the disaster is declared).

The maximum amount that an individual can take from all their retirement accounts combined as a qualified disaster distribution is $22,000. This is a per-disaster limit. A married couple could each take $22,000 from their own retirement plans. There are no restrictions on how the distributed funds are used, and the law does not specifically limit the amount of the distribution to the amount of the damage caused by the disaster.

Repayments

Victims who take qualified disaster distributions also have the opportunity to repay a qualified disaster distribution within three years to a retirement account tax-free. The three-year period will begin on the day after the date the funds were received. Individuals can make one or more recontributions during the three years. Repayments cannot exceed the amount that was distributed. The repayments can be made to any retirement plan to which the original distribution could have been rolled over. They do not have to be made to the account from which the qualified disaster distribution came.

The repayments are considered a direct rollover between a plan and an IRA and a trustee-to-trustee transfer between IRAs. This treatment means that no taxable event is considered to have occurred when a repayment of a qualified disaster distribution is made. It also means the once-per-year rollover rule will not apply to repayments of qualified disaster distributions. If an individual has already paid income tax on their qualified disaster distribution and then later recontributes the funds to a retirement plan, they will be able to file an amended tax return to recover the taxes already paid.

Spreading the Income Tax Over 3 Years

For many individuals struck by a disaster, taking a sizeable taxable distribution from their retirement account could mean more grief, this time from Uncle Sam at tax time. Remember, even though a qualified disaster distribution gets the individual out of the early distribution penalty, they will still have to pay income tax on any pre-tax funds withdrawn. To ease the pain, Congress has included a provision that allows individuals to include the income on their tax return ratably over a three-year period beginning with the year of the distribution. An individual can also elect to include the total amount in income for the year of the distribution. 

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

Converting a traditional IRA to a Roth IRA (or converting a workplace retirement plan) is optional. It is up to each IRA owner to decide if converting makes sense in their particular situation. Roth conversion is not a universally beneficial transaction, so each scenario must be evaluated individually. We all have different opinions and financial goals. While a Roth conversion could make sense for one person, it might be too far of a leap for another. To help with the decision, here is a list of people for whom a Roth conversion could make sense.

1. Those who will not need the money soon or at all, especially if they plan to pass the funds to beneficiaries. Most beneficiaries will be subject to the 10-year rule. This accelerated payout of an inherited IRA compresses the overall tax bill into a shorter time period. A Roth conversion eliminates the tax bill for beneficiaries (since the taxes are paid up front at conversion). Individuals who don’t need the money should consider converting, regardless of age. They are not doing the conversion for themselves; they are doing it for their children, grandchildren and other beneficiaries. A tax-free inheritance? What a great final gift!

2. Anyone naming a trust as their IRA or plan beneficiary. A Roth conversion removes the trust tax problem when inherited traditional IRA funds are retained in the trust. Trusts reach the 37% bracket when income exceeds just $16,000 for 2026. Converting to a Roth IRA while the original IRA owner is still alive and leaving those funds to a trust eliminates the trust tax problem after death.

3. Those who expect their future tax rates to be higher. This is especially true for those who are worried about future tax rate increases. (The national debt is over $40 trillion. Someone has to pay that bill.)

4. Those who have certain tax characteristics like high deductions, tax credits and other tax benefits. These can be used to offset Roth conversion income. But be careful! Capital losses can only offset up to $3,000 of Roth conversion income.

5. Those who have the money in non-IRA funds to pay the tax. Try not to use IRA dollars to pay the tax (via withholding). It reduces the amount that can be converted in the future. And avoid having taxes withheld for anyone under age 59½. This will result in a 10% early withdrawal penalty on the taxes withheld – because those tax dollars don’t actually get converted.

6. Young people. Younger people generally are in a lower bracket and have not yet accumulated large sums in their IRAs or 401(k)s. Therefore, a conversion should not generate an overwhelming tax hit. Plus, young people will have an extended time for the Roth dollars to compound tax-free. And speaking of a long time to let the assets grow…

7. Trump account owners. This can’t happen until the year the child reaches age 18. However, a Roth conversion of a Trump account at age 18 not only starts the “5-year forever” clock for the child, but also allows for over 40 years of tax-free growth by the time the child reaches age 59½.

And finally…

8. Those who do not want to worry about paying taxes later, in retirement, when they may need the money. A Roth conversion locks in today’s historically low tax rates. No conversion means a traditional IRA owner can only wait and hope that tax rates don’t significantly increase.

(Note: Watch for the September 14 Slott Report, “Part 2: Who Should NOT Convert to a Roth IRA.”)

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

Question:

Can I convert my traditional IRA to a Roth IRA even though I have no earned income for this year?  

Answer:

While having earned income or taxable compensation is a requirement for making a tax-year contribution to an IRA or Roth IRA, there is no such requirement for doing a conversion. Anyone with a traditional IRA is eligible to convert to a Roth IRA.

Question:

I have both an IRA and a 401(k). Can I satisfy the required minimum distribution (RMD) from my IRA by taking additional funds from the 401(k)?

Answer:

Unfortunately, this will not work. While you may aggregate RMDs from multiple IRAs, you cannot aggregate IRA and employer plan RMDs. You must take your IRA RMD from your IRA and your 401(k) RMD from the plan.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

One of the most important features of Trump accounts is that they must be invested a certain way during the period before January 1 of the year the child turns age 18. (The IRS calls this the “growth period.”) The IRS recently issued guidance on permissible (“eligible”) investments during the growth period. The guidance came in the form of proposed regulations issued on August 21, 2026.

During the growth period, Trump account funds must be invested in a low-cost mutual fund or ETF that tracks the S&P 500 stock index or another index comprised primarily of U.S. companies. The fund may not use leverage, and annual fees and expenses may not exceed 0.10% (10 basis points) of the net value of the assets.

On July 1, 2026, the Treasury Dept. announced that initial Trump account contributions must be invested in the State Street SPDR Portfolio S&P 500 ETF (Ticker: SPYM). In the coming months, funds can be allocated among four other ETFs.

Here are the highlights of the August 21 proposed regulations:

• ETF share classes of mutual funds qualify as permissible ETFs.
  
• The mutual fund or ETF must seek to replicate the returns of an index, but it need not necessarily hold each of the underlying stocks of the index.
  
• An index that is based on market capitalization (e.g., a mid-cap fund) would qualify, but an industry or sector-specific index (e.g., a health care fund) would not. In addition, an environmental, social and governance (ESG) fund index may not be used.
  
• An index will be treated as comprised of “primarily” U.S. companies if those companies represent at least 90 percent of the index based on their weighting in the index.
  
• Annual fees and expenses include transactional fees, such as sales charges, loads and redemption fees. They don’t include custodial fees or other similar charges associated with a Trump account itself (rather than any particular investment fund).
  
• A custodian may offer multiple eligible investments for Trump account funds. In that case, the custodian must select a default eligible investment if no fund is selected.
  
• Before a custodian first offers an investment fund, it must determine that the fund qualifies as an eligible investment. Thereafter, the custodian must monitor all investment funds at least once every 12 months. If the custodian determines that a fund no longer qualifies, its shares must be sold and reinvested within 30 days.

Most of the rules in the regulations are proposed to be effective retroactively back to January 1, 2026. However, the rules governing custodians won’t apply until after the IRS finalizes the regulations.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.