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14Sep
Inherited IRAs for Non-spouse Heirs
Intergenerational Planning

inherited-iraRecently we’ve had a significant number of questions from clients regarding inherited IRA’s for non-spouse heirs.

Here are some of the common pitfalls that sadly trap the unaware:

  1. Not properly dividing the IRA among the heirs.  For example, if the account is not split,  the age of the oldest beneficiary will be used to calculate the Required Minimum Distributions (RMD’s). This shortens the number of years the money can grow tax-deferred.
  2. Naming a trust as the beneficiary of an IRA requires special communication with the IRS by October 31 of the year following the year the owner died. Otherwise the trust is considered a non-designated beneficiary which may trigger payout of the entire IRA sooner than planned.
  3. While Roth owners never have to take distributions, non-spouse beneficiaries must take distributions.
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07Sep
Divorced / Widowed Women’s Feelings
Retirement

The feelings associated with divorce often mirror those associated with the death of a spouse because life as she knew it is ending.

Among others, these feelings may include anger, regret, relief, inadequacy, self-doubt, sadness and fear.  It always creates stress.

Resonate understands the parallels in the journey walked by women who are divorced and those who are widowed.

Many of the financial questions are the same:

  • “What will I be able to afford?”
  • “Will my money last as long as I do?”
  • “Can I stay where I am living?”
  • “Do I have enough money to continue to travel and see my children and grandchildren?”
  • “We always said that we would take care of one another; what happens now?”
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30Aug
Retirement Accounts Made Easy! – Part 3
Economy

Retirement Eggs

Welcome to the final in the three part series on “Retirement Accounts Made Easy!”

If you missed Parts One and/or Two, you may read the blogs posted on August 18th with Part 2 posted on August 24th.

I look forward to hearing your thoughts and questions.

 


*** PART THREE ***

Inherited Accounts

Contributions: Generally, you can’t contribute to an account you inherit.  The exception is an account owned by the spouse of the deceased, if that spouse retitles the account in her or his own name.

RMDs: The rules can get complicated, depending on whether you were the spouse of the deceased and whether the deceased was in the process of taking required minimum distributions before he or she died.  But generally, beneficiaries of inherited retirement accounts have three options:

  1. Transfer the assets to their own IRA: This option is only available to the spouse of the deceased.  Once the assets are in the spouse’s account, RMDs and early withdrawal penalties (if any) will be determined by the spouse’s age.
  2. Empty the account within five years: No withdrawals are required in any given year as long as all the assets are distributed within five years of the benefactor’s death.  The distributions will be exempt from the 10% early withdrawal penalty normally applied to distributions made before age 59 1/2.
  3. Stretch the account over the beneficiary’s lifetime: Take RMDs each and every year, starting the year after the benefactor’s death.  While this option would require the beneficiary to begin taking money sooner than the five-year option, the rest of the account can be left to grow for decades.  But it does mean that any beneficiary, of any age, must take an annual RMD.  Even a 1-year-old baby who inherited an IRA from her grandmother would need to take a required distribution each year the account has money in it.  This would be the case even if it’s a Roth IRA.  Fortunately, these RMDs are also exempt from the 10% early withdrawal penalty.

Note that the third option is available only to named beneficiaries of an account.  If the account didn’t have named beneficiaries, or they had already passed away, the account then goes into the overall estate.  Anyone who then inherits the account must liquidate it within five years, which could result in a large tax bill and the loss of future tax-advantaged growth; the option to “stretch” the account over a beneficiary’s life has been lost.  This is why it’s important to name specific people as the primary and backup beneficiaries of your retirement accounts, and to keep that information updated.

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18Aug
Retirement Accounts Made Easy! – Part 1
Retirement

Retirement EggsRecently we have received multiple inquiries regarding both contributions limits and withdrawal options from retirement accounts.

Therefore, I thought I’d create a handy reference guide for our clients and friends.  Because of the length of the information, please watch for all three parts of this blog.

PART ONE covers traditional and Roth IRA’s.  PART TWO includes 401(k)’s, 403(b)’s, SEPS (simplified Employee Pensions) and Simple IRA’s.  I’ll conclude the series with Inherited IRA’s.

I hope that you find this to be of value and, as always, welcome any questions or comments.

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11Aug
When Life Shifts
Issues of Aging

Resonate

The Resonate team understands that change happens to us all and that the key to managing change well is all about one’s mindset.

For example, when “life shifts” for you, how do you feel and what do you say to yourself?

Compare “I have no idea how I’ll survive this,” to “I’ll find a way through this.”

“This is just too much; I am totally overwhelmed,” to “I am strong enough to make it through this day.”

One of the key actions people take who handle change well is that they choose to stay in control rather than give in to the powerful emotions caused by the change.  This is not to say those people shut down and stop feeling, rather they choose to feel and also to monitor the messages they give themselves in the midst of the transition, (Examples of this are above.)

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19Jul
How Can LTC Insurance Help You Protect Your Assets?
Issues of Aging

Plan to create a pool of healthcare dollars that you can use when the time comes.

How will you pay for long-term care?  At the moment, you may not be able to answer that question – but long-term care insurance can provide an answer for you.

Why are baby boomers opting to make long-term care (LTC) coverage an important part of their retirement strategies?  The reasons to get an LTC policy at or after age 50 are very compelling.

Click link below for complete article.

How Can LTC Insurance Help You Protect Your Assets?

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13Jul
Common Retirement Misconceptions Can Derail Retirement Dreams
Issues of Aging

As I hold conversations with client about their retirement dreams, certain misconceptions seem more prevalent than others.  Today, I have chosen to list the misconception along with the facts.

  1. “My spending patterns won’t change much when I retire.”

The reality is that, assuming you live long enough, everything will cost more in retirement. Retirees spend disproportionately more on items such as health care.  Housing can also cost more if the current house is paid for and the new retirees decide to add a second home, to relocate or need the services of a retirement community.

(Source: Consumer Price Index; January 1981 through December 2015 through JP Morgan.)
  1. This misconception is a combination of “I’ll continue to work during retirement,” and “I don’t have to retire until I am ready.”

While 67% of employed Americans plan to work beyond age 65, only 27% actually achieve that goal.

Here are the top three reasons that cause people to retire earlier than planned.

  • 60% of the people who intended to work beyond 65 cannot due to health reasons.
  • 27% cannot keep working because the current employer either downsized or closes.
  • 22% of the time, the person intending to work has to quit to provide care of a spouse or family member.
(Source for this section #2 is Employer Benefit Research Institute, Matthew Greenwald and Associates. March 2015 through JP Morgan.)

One of the key benefits of working with a professional is, in addition to knowing the truth, “plan for the worst and hope for the best.”

On behalf of Resonate, I invite you to review existing plans to see if they are still on track or to create your plan for the first time.

Barbara A. Culver
CFP®, ChFC®, CLU, AEP®
Resonate, Inc.
(513) 605-2500
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