IRA expert Ed Slott, president of Ed Slott and Co., stressed that the COVID-19 pandemic “shouldn’t be down time” for advisors: “This is the time you want to strengthen your relationships.”
In particular, he said, many clients need your help understanding the federal government’s COVID-19 relief initiatives, including breaks on required minimum distributions from retirement accounts.
He spoke Wednesday at the Virtual Financial Advisor Summit hosted by Broadridge Advisor Solutions and Advisorist, a marketing firm.
“We know clients and consumers are desperate for information,” Slott said. “Call your clients. Connect with them. This is the kind of thing they want. Do it virtually…. More people are open to this…. You can actually bring in clients from all over the country now. So there are silver linings” despite all the “doom and gloom.”
Slott predicted: “This is the time you’ll be judged by how you reacted to [clients’] concerns [and] their anxieties.”
Slott noted he was “getting deluged with questions” about the government’s COVID-19 relief initiatives. Clients are “desperate to hear from you,” he told advisors, urging them to contact clients with information they can use about components of the $2 trillion relief package, signed into law on March 28, that they may not be clear on.
RMDs, Roth Conversions
For one thing, these are “uncertain times,” so maybe, when it comes to “clients that always were a slam dunk” for making the maximum IRA contribution, “things may have changed” with their situations, he pointed out. They also now have more time to decide if they want to make the contribution because the tax filing deadline has been delayed until July 15, he noted.
Another subject that clients are confused about when it comes to the government stimulus initiatives are the temporary waiver of required minimum distribution (RMD) rules for certain defined contribution plans and IRAs during 2020, he said. Noting that “all RMDs are waived for 2020,” he added that RMDs for beneficiaries are waived also, including for Roth IRAs, which many people may not realize.
Before COVID-19, RMDs “could never ever be converted to a Roth IRA because RMDs cannot be rolled over by law,” he pointed out. However, now, because “any distribution taken in 2020 is no longer an RMD, it can be converted, [which] gives you a window of opportunity to maybe do a Roth conversion,” he said.
IRAs, 401(k)s ‘Sitting Ducks’ to Congress
What’s more, “a Roth conversion is not looking too bad right now,” he told viewers. After all, he explained: “We have lower stock values and low tax rates. And anybody that’s watching what’s going on with our deficits, like me, has to realize there’s a good shot tax rates will increase immensely in the years to come.”
In particular, IRAs and 401(k)s are “sitting ducks for tax increases,” he said, adding: “It’s a low-hanging fruit [and] like a big, juicy steak to Congress…. We just wrote a $2 trillion check on a bank account that has no money in it. So, where is this going to come from and who’s going to pay the bill? Probably most of your clients that are stuck holding the bag with tax-deferred IRAs and 401(k)s.”
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