Frequently Asked Questions

Does tax-exempt income still need to be reported to the IRS?

Yes, in most cases. Even if an income source is completely tax-free, you generally still have to report it on your tax return. For example, municipal bond interest must be entered on Form 1040, even though it is not subject to regular federal tax. Similarly, you must report Roth IRA distributions on your return to prove to the IRS that they meet the criteria for tax-free status.

Can I put money into a Roth IRA after I retire?

You can only contribute to a Roth IRA if you (or your spouse, if filing jointly) have earned income from working. Pensions, Social Security, and investment income do not count as earned income. However, if you work a part-time job or run a small consulting business in retirement, you can contribute up to the amount of your earned income, subject to annual IRS contribution limits.

Does rolling over a 401(k) into an IRA trigger taxes?

Rolling money from a traditional 401(k) into a traditional IRA is a non-taxable event, provided you do a direct rollover (institution to institution). However, if you decide to roll a traditional 401(k) into a Roth IRA, you are performing a Roth conversion. You will owe ordinary income taxes on the entire converted amount in the year you make the transfer. Once the money is in the Roth IRA, all future growth and qualified withdrawals become tax-free.

How do Medicare premiums impact my HSA?

Once you enroll in Medicare (even just Part A), you are no longer legally allowed to contribute new money to a Health Savings Account. However, you maintain full control over the funds already in the account. You can continue to spend that money tax-free for the rest of your life on qualified medical expenses, which include your Medicare Part B and Part D premiums.