Listener Questions: Rapidfire Edition, Ep #144

Can you convert a beneficiary IRA to a Roth IRA? Can you roll a 401k into a 403B? What about alternative investments—are they worth the risk? The questions have been rolling in, so in this episode of the Retirement Made Easy podcast, I’m tackling some of the most asked questions I’ve received. Don’t miss it! 

You will want to hear this episode if you are interested in…

• [4:19] Question #1: Can you convert an inherited IRA to a Roth IRA?
• [7:44] Question #2: Can you roll a 401k into a 403B?
• [12:45] Question #3: Are alternative investments risky?
• [15:49] Question #4: When do survivor benefits begin?
• [18:51] Question #5: Can a non-working spouse contribute to a Roth IRA?
• [20:38] Question #6: How does the gift tax exclusion work?

Question #1: Can you convert an inherited IRA to a Roth IRA?

I’ve received numerous emails and phone calls from people who have recently inherited an IRA. If you inherit a traditional IRA from a parent, how does it work? If you inherited it after January 21st, 2020, you have to follow the 10-year rule. The rule dictates that you have 10 years to take distributions out of the IRA and pay taxes on them. But could you convert the beneficiary IRA to a Roth IRA? The answer is no. Your plan B might be to gift the IRA distributions. But, sadly, again, the answer is no. IRA distributions cannot count as qualified charitable contributions. 

Question #2: Can you roll a 401k into a 403(b)?

If you change jobs, can your 401k move into a 403(b) or vice versa? Yes! How does it work? It’s actually pretty easy! You can contact the old custodian, explain the situation, and ask what information they need from you. Other custodians allow you to do the entire process online. I help walk clients through this all the time. 

One of my clients inherited a 401k and was retiring. This individual had never listed his wife and children as beneficiaries! His mother didn’t list him as the beneficiary on all of her accounts, so some of them will have to go through probate (which will be costly). This is a mistake no one should be making! 

Question #3: Are alternative investments risky?

In most cases, alternative investments are illiquid. Dividends aren’t promised. Your money is often trapped in this investment. You are a shareholder in an investment that isn’t publicly traded. How do you value it? How do you get your money out? You can request quarterly redemptions and try to cash out some of the money. But some alternative investments only become liquid upon your death! Be careful with these because, yes, they are inherently risky.

Question #4: When do survivor benefits begin?

One of my listeners asked when survivor benefits begin. This listener’s neighbor recently lost her husband at 57. They were both retired and in poor shape financially. Sadly, the survivor benefit requires you to be age 60 at a minimum. This particular widow has three years until she can claim that benefit. 

If she had been my client, I would have recommended a life insurance policy for the husband until she was at least 60. The second thing to consider is that survivor benefit is greatly reduced if you claim it right away at age 60. So what are this gal’s options? Should you keep your life insurance once you retire? Listen to hear my thoughts. 

Resources & People Mentioned

• 3 Steps to Retirement Planning
• Atomic Habits by James Clear