Ed Slott: 8 Top Retirement, Tax Priorities for Advisors in 2024

2. Know your clients' rollover options.

"My advice to advisors is always do what's in the client's best interest," Slott said.

"In other words, it's you not only have to want to do the right thing, you have to know what it is. So when it comes to rollovers, you have to know all the options," Slott relayed. "Go over them with the client — list, the pros, the cons, the benefits, drawbacks, advantages, disadvantages — whatever you wanna call it. And do a full analysis and help the client make the right decision."

Adds Slott: "Maybe the right decision isn't always to do an IRA rollover. Maybe it's to leave money in a plan or go to a new company's plan or take advantage of lump-sum distribution ... But you must be educated enough to have these discussions and that's what they're getting at."

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3. Know the tax rules so you don't 'blow it' for the client.

Advisors "don't always know the [tax] ramifications," Slott relayed. For instance, if an advisor advises "on an IRA rollover and then it turns out the client has maybe $1 million of highly appreciated company stock in the plan that could have been taken out in a lump-sum distribution for capital gain rates through net unrealized appreciation. Now that's off the table — they blew it."

Another situation: The advisor does a rollover to the IRA "and they didn't know or didn't ask if the client had any ... claims [for] creditor protection; maybe it would've been better to stay in the company plan."

The 401(k), Slott continued, "has the gold standard of creditor protection in ERISA ... where IRAs are subject to creditor protection only in bankruptcy."

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4. Know how to handle RMDs.

Secure 2.0 moved RMDs from age 72 to 73.

So clients who turn 72 in 2023 "don't begin RMDs this year," Slott relayed. For IRA owners, "if you were born in 1950 or earlier, you do, you continue what you already did. But if you were born in '51 or later... you can use the age 73. If you use age 73 and you start at 73 next year, your first required distribution isn't due actually until April 1, 2025, because your first RMD year is 2024."

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5. Remember the 'nice change' in Secure 2.0.

Starting next year, Roth 401(k)s "will no longer be subject to lifetime RMDs," Slott explained.

Congress "fixed that in secure 2.0. So starting next year, employees in Roth 401(k)s will not be subject to RMDs on their Roth 401(k) balances," Slott said. "That's a nice change."

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6. Consider Roth conversions while taxes are low.

"There's no question a Roth IRA is the best retirement account to own because it grows totally tax free," Slott said.

The client and the advisor should work together to see how much of a Roth conversion they can get "through in these very low tax brackets we have. So advisors should be encouraging clients to get more money out of IRAs at these ridiculously low tax brackets," Slott advised.

"We have that the lowest we'll probably ever see in history," Slott said. "And there may only be three years to get these rates ... After 2025, the rates are supposed to be jacked back up."

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7. Focus on gift and estate planning.

Advisors "can get a lot of money out of a client's estate to the next generation through tax-free gifting," Slott explained. "Right now we have a $12.9 million exemption, a federal estate tax exemption, which you can use during your lifetime. That's per person. But again, those limits are scheduled to be cut in half after 2025."Talk to high-net-worth clients "about getting money out through gifting," Slott said.

There are three ways "you can do it that are absolutely tax free" — the annual gift tax exclusion, unlimited gifts and tax-exempt gifting.

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8. Keep your eyes on the IRS.

"We're still waiting for regulations [from the IRS] on the original Secure Act — final regulations on the 10-year rule [for withdrawals from inherited IRAs]," Slott relayed, as well as regulations on Secure 2.0. "Even the IRS put out a statement a few weeks ago saying, 'Well, we have a lot on our plate, we'll get to it.'"

"So there's still a lot of questions up in the air, so you have to sort of play with the rules you have now, but there will be a lot of new information coming out next year."

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