Estate and Elder Law

What the Fiscal Cliff Deal Means for Retirement Accounts


The fiscal cliff deal has not only affected income and estate taxes, but it has also changed how retirement rollovers are handled.

Roth Rollovers 

The new provision gives freedom to retirement account holders. Anyone with a 401(k), 403(b), or a similar plan may rollover their funds into a Roth 401(k) whenever they desire. Before the fiscal cliff deal was approved, individuals with 401(k)s were only able to rollover into a Roth 401(k) if they were changing jobs, retiring, or were over the age of 59 and ½.  

By making it easier for individuals to select the time of the rollover at their discretion, Senate officials anticipate an influx in federal funds. Conversions are taxable. As more people elect to convert to a Roth 401(k) for the added benefits, the more taxes will be collected.  

Why convert to a Roth 401(k)? The future tax benefits are attractive.  Tax-free disbursements are made to the Roth 401(k) holder during their retirement and there are no income restrictions, but contributions must be made with after-tax dollars. 

The retirement-savings provision is just one part of the fiscal cliff deal made in an effort to "fix" national debt. Combining taxes collected from retirement conversions, with the increased estate and capital gains taxes, and the income tax jump for high-income earners, are all part of the deal that officials hope will correct budget issues.  

IRA Charitable Rollover is Back 

Another retirement incentive is the "IRA charitable rollover." The IRA charitable rollover that expired in 2011 returns in 2013. Now individuals over the age of 70 ½ may transfer up to $100,000 to a qualified charity as long as the money is rolled over from a retirement account. The transfer allows the individual to transfer their money with no income tax liability and will count as their required minimum distribution. 

Individuals who meet the above requirements still have until the end of January 2013 to complete an IRA charitable rollover for the 2012 tax year. Additional income tax can also be avoided for those who received mandatory distributions in December 2012. As along as the mandatory distributions are donated to a qualified charity, the individual will not be liable for income tax on the distributions. The IRA charitable rollover is expected to expire at the end of 2013; take advantage of the retirement incentives while they are active. 

Gregory Herman-Giddens, JD, LLM, TEP, CFP, Attorney at Law (NC, FL, TN), Board Certified Specialist in Estate Planning and Probate Law (NC). North Carolina Registered Guardian, Solicitor, England and Wales. Follow his blog, North Carolina Estate Planning Blog..


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  • A lot of people might wonder just what the fiscal cliff deal means for everyone. Among the larger beneficiaries are certain corporate entities. According to the Huffington Post, preserved corporate tax breaks include a depreciation tax break for racetrack owners, who can write off depreciation of their property, expense write-offs for film studios, safety equipment and training write-offs for mining companies and a tax break on loans lent overseas by American companies, also called “active financing.”Read more <a href=">.