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January 2018

Update on repeal of Roth Conversion Recharacterization

On 12/22/17 I sent out an update regarding the changes in the new tax law that eliminate the ability to recharacterize (undo) a Roth conversion. The short version is that the bill eliminated the recharacterization provision starting in 2018 but it was unclear whether conversions that occurred in 2017 would still have the option to recharacterize up to what would have been the normal deadline of 10/15/2018. The bill was ambiguous at best with respect to this issue because it stated that there would be no more recharacterizations in 2018. This has been up for debate but now we have clarification from the IRS.

I read several opinions on this matter and the consensus seemed to be that there just wouldn’t be any recharacterizations in 2018. This didn't sit well with me in particular because the language used stated, "…conversion contribution establishing a Roth IRA during a taxable year can no longer be recharacterized…" and the effective date is "…for taxable years beginning after December 31, 2017." My interpretation was that it would apply to conversions starting in 2018 and thus a conversion from 2017 would retain the ability to be recharacterized up to the normal deadline of 10/15/2018. Anything other than this would simply be unreasonable because anyone who did a conversion in 2017 wouldn't have had enough time to do a recharacterization before the end of the year because the law was passed so late in the year. Well, the verdict is in and the IRS said that I was right!

Well the IRS didn't say specifically that "I" was right, rather my interpretation was right. On the IRS website under the FAQs for Roth IRA recharacterizations ( is the question "How does the effective date apply to a Roth IRA conversion made in 2018?" The answer is:

A Roth IRA conversion made in 2017 may be recharacterized as a contribution to a traditional IRA if the recharacterization is made by October 15, 2018.

So let me just take a moment to gloat a little bit for being right when all the experts seemed wrong….ok I'm done. So if you did a conversion in 2017 and were worried that you might need to recharacterize, you can rest easy now because you do in fact still have this option. It is important to note, that this does not affect 2018 Roth conversions, which will not be able to be recharacterized. From the same FAQ:

A Roth IRA conversion made on or after January 1, 2018, cannot be recharacterized. For details, see “Recharacterizations” in Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).

This is a great example of how things can and do change and often times aspects of changes may be up to interpretation. Usually, when this happens, we get a pronouncement or clarification from IRS, but that is not always the case. There have been and still are many things in the tax code and specifically in the IRA realm that are ambiguous. If you have any questions on how this may apply to you, give us a call

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Introducing our new Logo!

I was having a conversation with my brother-in-law a couple of years ago about how a professional chooses to dress shouldn't matter because there are a lot of slick people out there that have fancy offices and talk a big game but have no real education behind whatever it is they are selling or advising on. This is very prevalent in the financial advice business where obtain securities and insurance licenses is somewhat easy. Securities and insurance licenses are not advanced education and credentials but they have given the appearance of such. What is really scary is that one can study and pass the Investment Advisor exam in just a couple of months and then all of a sudden call themselves a "Financial Advisor" and advise people on their hard-earned life savings and the client assumes they are an "expert" because they are licensed.

If you are choosing to work with a professional in any field, wouldn’t you want to know they are an expert with advanced education and credentials in their field? I know I would. Imagine if medical school was not required for someone to become a doctor; you'd have your choice between doctors that have gone to medical school and those that have not. Wouldn't you be more likely to choose the doctor that you know went to medical school and demonstrated through rigorous examination that they know what they are doing? In the financial planning field, there is no required "Financial Planning School," because the minimum requirements are these securities exams. Well, this is where a governing body such as the Certified Financial Planner™ Board of Standards comes in, to establish a standard of minimum level of competency for giving personal financial planning advice. So in continuing with my analogy, financial advisors who have earned the CFP® would be analogous to the doctors that went to medical school and the advisors that have not earned it are those who haven't.

So I said to my brother-in-law that one of these days I'm going to show up to an introductory meeting with someone I've never met before wearing regular ol' jeans and a t-shirt and then tell them they should "hire the brains, not the suits." The thought was to make a statement that they should choose to work with me because they recognize that advanced education and credentials along with critical thinking and putting the client's best interests first are what is most important, not how I dress or what I look like. While I've never been able to bring myself to actually do this, it was the spirit of the idea that led me to change my logo.

I wanted to convey that the difference between myself and the average, so-called "Financial Advisor" is my advanced education and credentials such as having specifically studied financial planning in college, completing a masters degree specific to financial planning, to earning the CFP® (CERTIFIED FINANCIAL PLANNER™) and CIMA® (CERTIFIED INVESTMENT MANAGEMENT ANALYST®) credentials, among others. I am a member of Ed Slott's Master Elite IRA Advisor group which provides ongoing, advanced education related to IRAs/retirement planning that I don't even get CE credits for but I do it anyway because I value the education and I know it helps me better advise my clients. From this, the new logo was created.

A lightbulb is often used to represent an idea so that was the basis of the logo; to represent the ideas and intelligence derived from obtaining advanced education. The shape of the lightbulb with the right side being open is designed to retain the "P" for Portnoff. The brain is a nod to the original slogan to "hire the brains not the suits" which really wouldn't have been a useable slogan but would have conveyed the point perfectly. Ultimately I decided on "Because you Deserve an Educated Advisor" as my new slogan which ties into the logo because everyone does deserve an educated advisor right?

So I'm now officially introducing this new logo and I hope you like it, but if you don't like it, well that's ok because logos don't matter any more than slick suits and fancy offices do 😊. I've also completed a refresh of my website which is now mobile responsive, meaning it will look much better and be much easier to use on mobile devices such as tablets and phones. Throughout the year I'll also be working diligently on adding educational content such as the Roth IRA information to acknowledge the 20th Anniversary of the Roth IRA so keep a lookout for that. Much of the content will go out via social media channels Facebook, Twitter and LinkedIn, so if you are not subscribed to one or more of those, go ahead and do that now so you don't miss anything. You can follow us on Facebook by going to, @JeremyPortnoff for Twitter, and for LinkedIn. 

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20th Anniversary of the Roth IRA

This January marks the 20th anniversary of the Roth IRA which became available to investors in 1998. A Roth IRA in an individual retirement account that accepts after-tax contributions and tax-free distributions (income) for retirement. To celebrate this Roth IRA anniversary, I'll be sending out a variety of Roth IRA info throughout the year. This 20th anniversary is a good reminder to take a look at the Roth IRA to see why it might be right for you.

Funds that accumulate in a Traditional IRA are not completely owned by the IRA owner because every retirement account has a partner, and can you guess who that partner is? That's right, Uncle Sam is the partner in your Traditional IRAs, SEP and SIMPLE IRAs, 401k, 403(b), etc., and he is waiting to take his cut. Imagine you have $1,000,000 in a Traditional IRA…looks great right? Unfortunately, most people will only end up getting about 2/3rds to ½ of their IRA with the other portion going to taxes. The advantage of the Roth IRA is that you fund it with after-tax dollars which will help you avoid a tax time bomb when retirement rolls around.

“I am a big proponent of Roth IRAs, as contributions today lead to tax-free money in retirement, when you need it most,” said Ed Slott, CPA, founder of Ed Slott and Company and a nationally-recognized IRA expert who was named “The Best Source for IRA Advice” by The Wall Street Journal. “Unfortunately, the rules surrounding these retirement accounts are as confusing as ever, so it is important to work with someone who specializes in them.”

In 2008 I became a member of Ed Slott’s Master Elite IRA Advisor Group℠, an exclusive membership group dedicated to the mastery of advanced retirement account and tax planning laws and strategies. Members of Ed Slott’s Elite IRA Advisor Group℠ attend semiannual live training events and have year-round access to Ed Slott and Company’s team of retirement experts for consultation on advanced planning topics.

To figure out whether a Roth IRA or Roth conversion is right for you, it may be beneficial to work with a financial professional who receives specialized training in the ‘second half’ of the retirement game, the distribution phase. As a member of Ed Slott’s Master Elite IRA Advisor Group℠, I take pride in taking necessary steps to understand the intricacies of retirement accounts and the tax laws that impact them and knowing that I am up to speed on the latest retirement strategies so that I can confidently provide my clients with the help they need to plan for a successful retirement.

“Over the last 20 years, a lot has changed for Roth IRAs,” said Slott. “With ever-changing laws, including Congress’s recent decision to eliminate Roth recharacterizations, it is more important than ever for financial professionals to receive ongoing training."

ABOUT ED SLOTT AND COMPANY, LLC: Ed Slott and Company, LLC is the nation’s leading provider of technical IRA education for financial advisors, CPAs and attorneys. Ed Slott’s Elite IRA Advisor Group℠ is comprised of nearly 400 of the nation’s top financial professionals who are dedicated to the mastery of advanced retirement account and tax planning laws and strategies. Slott is a nationally-recognized IRA distribution expert, bestselling author and professional speaker. He has hosted several public television specials, including his latest, “Retire Safe & Secure! With Ed Slott.” Visit for more information.

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