Articles Tagged with IRA

2.28.20Many people have tens of thousands–even hundreds of thousands–of dollars in their IRAs. If you have an asset that large, shouldn’t you devote more effort to planning for its ultimate disposition?

A designated beneficiary is named on a life insurance policy or some type of investment account as the individual(s) who will receive those assets, in the event of the account holder’s death. The beneficiary designation doesn’t replace a signed will but takes precedence over any instructions about these accounts in a will. If the decedent doesn’t have a will, the beneficiary may see a long delay in the probate court.

If you’ve done your estate planning, most likely you’ve spent a fair amount of time on the creation of your will. You’ve discussed the terms with an established estate planning attorney and reviewed the document before signing it.

2.20.20Most financial experts would agree that it is rarely, if ever, a good idea to take an early withdrawal from a traditional IRA or Roth IRA. This is due in part to the high cost of penalties that can hit an account holder for an early withdrawal (not to mention losing out on years of potential earnings).

Early distributions from IRAs—before you reach 59½—typically are hit with a 10% tax penalty, and you may owe income tax on it. The IRS uses the penalty to discourage IRA account holders from dipping into their savings before retirement. However, the penalty only applies if you withdraw taxable funds, says Investopedia, in its new article entitled “Early Withdrawal Penalties for Traditional and Roth IRAs.”

If you withdraw funds that aren’t subject to income tax, there’s no penalty for distributions taken at any time. The issue of whether the funds are taxable depends on the type of IRA. Early distributions from traditional IRAs are the most likely to incur significant penalties. That’s because you make contributions to this type of account with pretax dollars. These are subtracted from your taxable income for the year, which will decrease the amount of income tax you'll owe. As a result, since you get an upfront tax break when you contribute to a traditional IRA, you have to pay taxes on your withdrawals in retirement.

2.7.20This time of the year is a great time to revisit your estate plan, so you can ensure your legacy is protected for years to come.”

Many of us set New Year’s resolutions to improve our quality of life. While it’s often a goal to exercise more or eat more healthily, you can also resolve to improve your financial well-being. It’s a great time to review your estate plan to make sure your legacy is protected.

The Tennessean’s recent article entitled “Five estate-planning steps to take in the new year” gives us some common updates for your estate planning.

1.15.20New research from TD Ameritrade finds that many individuals are confused when it comes to Roth IRAs — accounts that are funded with post-tax money. Consequently, many people are leaving cash on the table, when it comes to maximizing this savings strategy.

CNBC’s recent article entitled “Not knowing these Roth IRA truths can cost you” explains the biggest things that investors typically don’t know about Roth IRAs. They include not knowing how to decide between a Roth IRA and Traditional IRA, along with the fact that you can contribute to a 401(k) and a Roth IRA.

You’re allowed to contribute to a 401(k) and a Roth IRA. Many workers get their retirement savings education from their employer. Those employer-provided plans are usually 401(k) plans, and you generally want to contribute enough to that account to get the employer match. However, what 60% of investors incorrectly think is that you can only contribute to a Roth once you reach your 401(k) maximum, according to TD Ameritrade’s research. It’s okay (and smart) to be contributing to both a Roth IRA and a 401(k) at the same time. You don’t have to hit the 401(k) max to contribute to a Roth IRA.

5.10.19“If you're between 55 and 64, you still have time to boost your retirement savings. Whether you plan to retire early, late, or never ever, having an adequate amount of money saved can make all the difference, both financially and psychologically. Your focus should be on building out—or catching up, if necessary.”

It’s never too soon to begin saving. However, the last decade prior to retirement can be crucial. By then you’ll probably have a pretty good idea of when (or if) you want to retire and, even more important, still have some time to make changes, if need be.

If you discover that you need to put more money away, Investopedia’s article “Top Retirement Savings Tips for 55-to-64-Year-Olds” gives you several time-honored retirement savings tips to consider.

12.11.19Once you understand what a will can do, the reason that everyone needs one becomes a lot clearer, especially if you have any minor children or any assets.

A will is a legal document used to provide clear and binding instructions on how you want your assets to be distributed after you die. Everyone should have a will, because they can also be used to identify a person who you want to handle your property, known as the executor and who should be the guardian of your minor children, if both parents die.

Yahoo Finance’s article, “What Does a Last Will and Testament Actually Do?” explains that a last will and testament has instructions for what you want to happen with your assets. A will also designates an executor, names beneficiaries and more. You should work with a qualified estate planning lawyer, when preparing one.

10.18.19An IRA is one of the most popular ways to save for retirement. The possibility, however small, does exist that you will pass before using the entire IRA. How do you decide who to leave your IRA to?

In addition to leaving assets, including IRAs and 401(k)s, to heirs, you can also leave assets to a trust. When you first open an IRA, you are asked to designate a beneficiary. However, over time you may find yourself wanting to change that designation. You may also be doing sophisticated estate planning that involves having a trust as the beneficiary for your IRA.

KTVA.com’s recent article, “How to Name a Trust as Beneficiary of an IRA,” discusses some of the important elements of naming a trust as an IRA beneficiary. Naming a trust as a beneficiary requires careful planning, so work with an experienced estate planning attorney.

10.17.19Whenever there are major changes to tax laws, estate plans need to be reviewed. The change to the kiddie tax because of the Tax Cuts and Jobs Act of 2017 is an excellent example of this.

If your estate plan includes passing down traditional IRAs to children and grandchildren, you better make an appointment with your estate planning attorney soon. Changes that began with the 2017 Tax Cuts and Jobs Act may turn your planning inside out. Your children might find themselves in the top tax bracket, which is not likely what you had in mind.

The Tax Cuts and Jobs Act brought about a big change in how children are taxed on unearned income. This includes required minimum distributions (RMDs) from inherited IRAs.

4.27.19Those who happily enjoy senior discounts at national parks, fast food restaurants and movie theaters will tell you that turning 59 ½ is no big deal. Chances are at 59 ½, you’re still enjoying good health, working productively and wise enough to know you’re a bit smarter than you were back in the day.

59 ½ is around the time that people wake up to the idea that hey, they really are getting older. With that realization, they need to embrace the financial benefits of their age and there are more than a few, according to the article “What Should You Do When You Turn 59½?” from Kiplinger. Here are some of the advantages, and also a few to-do items.

Review Your 401(k). At age 59½, you reach the magic age when you can start taking money out of your retirement accounts without penalty. That’s not to say it’s time to drain your accounts, but it does give you more options.

9.9.19It used to be unheard of, a divorce after fifty, sixty or even seventy years old. However,  gray divorce is now becoming more common. There are pitfalls to be aware of, before taking this big step.

According to the National Center for Health Statistics and the U.S. Census Bureau, younger Americans are divorcing at much lower rates, while divorces for adults over 50 have just about doubled since the 1990s. Back in the 90s, for every 1,000 persons age 50 and older, only five divorced. In 2015, for every 1,000 married persons age 50 and older, 10 are divorced.

The issues of a gray divorce are very different than those of a younger couple, not to mention the financial and legal complexities of marriages that span decades.

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