NEWSLETTER
Xerxes Nabong, CFP®, CDFA®
Philip M. Maliniak, CRPC®
Nicole Brown-Griffin, CFP®, CDFA®, EA
Aaron Petty, Client Associate
Hampton Roads: (757) 394-3486
Greater Phoenix: (480) 687-9339
Orange County: (949) 660-8869
Wealth Avenue May 2026 Newsletter: IRA Rules and Strategies You Should Know
IRAs are simple on the surface. Put money in, let it grow, take it out later. But under the hood, there are a lot of rules that can either work for you or against you depending on how you use them. From contribution rules to Roth strategies, conversions, withdrawals, and required distributions, here’s what you need to know.
Contribution Rules and Eligibility
- You must have earned income to contribute. No earned income, no contribution.
- If one spouse is working, both spouses can contribute through a spousal IRA.
- Contribution limits for 2026 are $7,500, or $8,600 if age 50+. You cannot contribute more than you earn.
- You have until the tax filing deadline to make prior year contributions (April 15, 2027 for tax year 2026).
- Traditional IRA contributions may be deductible depending on income and employer plan coverage.
- Roth IRA contributions are not deductible, but grow and come out tax-free if rules are followed.
- Roth IRA income limits may prevent direct contributions.
Roth Strategies and Conversions
- If you are over the Roth income limit, a backdoor Roth may still be available.
- The pro-rata rule applies if you have pre-tax IRA money, meaning the IRS looks at all IRAs as one.
- You can convert Traditional IRA money to Roth at any time. There is no income limit.
- Roth conversions are taxable in the year they are done, so timing matters. Lower income years and before you reach required minimum distribution age (RMD) are often ideal.
- Each Roth conversion has its own five-year clock for penalty purposes.
- There is also a five-year rule tied to Roth earnings before they become fully tax-free.
- Roth contributions can always be accessed, but earnings are restricted until rules are met. Roth conversions cannot be undone.
Withdrawal and Access Rules
- Withdrawals before age 59½ may trigger a 10% penalty plus taxes.
- There are exceptions to the penalty, including first home, education, and certain medical expenses.
- Roth IRA withdrawals follow an ordering system: contributions, then conversions, then earnings.
- Once money is taken out, it generally cannot be replaced unless within the 60-day rollover rule.
- The 60-day rollover can only be used once per 12-month period across all IRAs.
Required Distributions and Longevity Planning
- Traditional IRAs require RMDs starting at age 73 (age 75 if born 1960 or later).
- Roth IRAs do not have RMDs during your lifetime.
- RMDs are taxed as ordinary income and cannot be rolled over or converted.
- Missing an RMD can result in penalties, though they may be reduced if corrected quickly.
- Qualified Charitable Distributions (QCDs) allow those 70½+ to give directly from an IRA to charity and reduce taxable income.
Beneficiary and Legacy Planning
Beneficiary IRAs follow different rules than your own IRA.
Many non-spouse beneficiaries must withdraw the entire account balance within 10 years.
Spouses have more flexibility and can treat the IRA as their own.
Beneficiary designations override a will, so they must be kept up to date.
Trusts as beneficiaries need to be structured carefully to avoid unfavorable tax outcomes.
Tax Strategy and Planning Considerations
IRA decisions should always be coordinated with your overall tax picture.
Withdrawals can impact Social Security taxation and Medicare premiums (IRMAA).
Strategic withdrawals and Roth conversions can smooth income and reduce lifetime taxes.
Not all IRA dollars are equal. Pre-tax and Roth dollars behave very differently.
BONUS - Early Retirement Access
If you want to retire before 59½ and most of your assets are in retirement accounts, there are still options.
Rule of 55
If you leave your job in or after the year you turn 55, you can take withdrawals from that employer’s 401k without penalty.
72(t) Distributions
You can take structured withdrawals from an IRA before 59½ without penalty.
Must continue for at least 5 years or until 59½, whichever is longer.
Breaking the schedule triggers retroactive penalties.
Final Thought
When you step back, IRA rules fall into four lanes:
How money goes in
How it grows
How it comes out
How it is taxed along the way
This is where planning matters. IRAs are not just retirement accounts. They are one of the most flexible planning tools you have when used intentionally. We help bring all these moving parts together into a clear strategy, so your IRA decisions support the bigger picture and move you forward.
Your Team at Wealth Avenue,
P.S. Thank you for your continued trust and confidence in us! We continue to receive numerous introductions from you and we truly appreciate it! Our practice continues to grow through relationships built on trust and thoughtful planning and we work best with those who value long-term collaboration and clear, strategic guidance. If someone in your life has recently changed jobs, is approaching retirement, received an inheritance, or simply wants a more defined financial path, we’d be glad to connect. We serve clients from our offices in Virginia Beach, Scottsdale, and Newport Beach, and also work with many families and businesses virtually.
One final read: The below Forbes article is a great complement to what we just walked through. It highlights how Roth IRA conversions have become more relevant in today’s planning environment, especially after recent legislation changed inherited IRA rules and increased the importance of long term tax strategy. While converting from a traditional IRA to a Roth creates a current tax bill, it can reduce future taxes, eliminate required distributions, and add flexibility for both retirement income and legacy planning. As you saw throughout this newsletter, the decision comes down to timing, tax brackets, and your overall financial picture, with factors like the pro-rata rule, five-year rules, and Medicare impacts all playing a role. Ultimately, Roth conversions are not about short-term tax savings, but about managing taxes over your lifetime and for the next generation.
