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Joe Lucey

Spousal & Non-Spousal IRA Rules

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Spousal IRA Rules

When a spouse inherits an IRA, he or she has all of the same options as a non-spouse beneficiary, along with some other choices.

For example, if a wife is the sole beneficiary, she also has the option to “treat it as her own.” The surviving spouse will need to either transfer assets to her own existing IRA or open a new one in her name. After rolling or transforming the inherited funds into her own IRA, she may take withdrawals at any time but will be subject to the 10 percent penalty for withdrawals made before she turns age 59½. She also is responsible for any taxes owed on withdrawals.

Non-Spouse IRA Beneficiary Rules

The tax implications regarding what a child or other non-spouse beneficiary does with an inherited IRA can be complicated. Here is a brief look at just a few of the tax implications when a non-spouse inherits an IRA.

  • You must take required minimum distributions (RMDs) on the IRA; if you don’t, you can face a 50 percent penalty from the IRS.
  • You can withdraw money from the account at any age without an early distribution penalty, even before age 59 ½. If it is a traditional IRA, you will usually have to pay income tax on the entire amount withdrawn.
  • Because a Roth IRA is funded with nondeductible contributions, no taxes are owed on either original contributions or gains if the owner held it for at least five years.
  • If the deceased owner passed away before starting RMDs, you can wait to take distributions, but you must withdraw all the funds by Dec. 31 of the fifth year of the owner’s death.
  • No matter when the original owner died, you can take the RMDs over your life expectancy beginning with the year following the account owner’s death.

The content provided here is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice.  Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.

Making Plans for How We Want to Be Remembered

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It may sound morbid, but an uneventful death is one of the most thoughtful things you can give your children. As sad as it is to cope with the death of a loved one, the situation can be worsened by poor communication and disorganized planning.

For example, have you considered what you would like regarding a funeral? Do you have a favorite Psalm you’d like read or hymn sung? Do you want to be buried or cremated? Will your organs be donated? Yes, these can be very troubling and painful questions to address — but imagine having to consider them after you just lost that loved one. This is what it will be like for your spouse or children if you don’t address funeral planning issues while you’re alive.

Awash with grief, family members may not be able to recall details about your history — early jobs, places lived, volunteer activities, even some of the things you may be most proud of in your life — to include in your eulogy or obituary. If your children are not familiar with people in your everyday life, they may not even know to contact certain friends to let them know you’ve passed.

Consider writing out some of these things to help your loved ones plan a beautiful and loving tribute after your death. This way, they won’t have the regret of remembering your favorite hymn months after the funeral. Give your children access to your address book, email and cell phone contacts, and any other social media accounts so they can let people know. Don’t forget to include former colleagues they may have never met but that you know would like to pay their respects at your funeral.

And of course, have a will and/or or trust in place to make sure your wishes for your estate are followed. We can refer you to a qualified estate planning attorney who can assist you with this.

Why think about death now? Because it’s inevitable, and detailing how you would like to be remembered is one of the most considerate gifts you can provide your children during one of most difficult times in their life.

How Much Money Do You Need to Retire?

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How much money do you need to retire? That’s about as personal a question as, “What do you look for in a spouse?” or “What is your dream job?” The answer is different for everyone.

So are questions about when you want to retire, how you want to retire (suddenly or gradually) and where you want to retire. There are vast combinations of these and many other variables that serve to make the style and level of retirement different for every individual — even within the same household.

Americans are retiring at a rate of 10,000 per day, which means a lot of people need retirement planning advice. Financial services firms like ours develop relationships with neighbors and friends in our local community to offer personalized guidance and advice on financial matters. If you’re pondering how much money you may need to retire, please come and see us. Not only can we help you with that assessment, we create financial strategies through the use of insurance and investment products to help you work toward your retirement goals.

Fidelity recently conducted a survey that yielded wildly divergent responses in terms of how much money people think they need to retire. For example, 25 percent think they will need to have saved two to three times their annual salary during their last year of full-time work, while many financial advisors say it’s more like 10 years’ worth of salary saved. Overall, 74 percent of Americans underestimate how much they will need for a comfortable retirement.

It’s important to keep in mind that issues may arise even if you’ve saved an appropriate amount for your household by the time you retire. Some circumstances — such as the unexpected death of one spouse before the other — could expose the need to replace a lost source of income. This is a possible circumstance where buying a life insurance policy, even long after your children have grown up and are on their own, may still be a part of your overall financial strategy, depending on your personal circumstances. At a minimum, one of the two Social Security benefits the couple was receiving will stop when one spouse dies. A life insurance payout can help augment any lost Social Security or pension benefits to help a surviving spouse maintain his or her current standard of living throughout retirement.

While some retirement factors are personal, others may be cultural in nature. The most current available data shows that in the U.S., the average white family has more than $130,000 in retirement savings while the average African American household has only $19,000. Over time, disparities in income and personal wealth have an even more dramatic impact: By the time they enter their 60s, whites have accumulated 11 times more in savings than African Americans — on average at least $1 million more in wealth.

Unequal pay and career opportunities also may impact a woman’s ability to save enough for retirement. To complicate matters further, women tend to live longer. A couple estimating how much they need to retire may make the assumption that they’ll need, for example, 25 years of retirement income. The husband might pass away after 15 years while the wife lives another 15 years on her own. However, their income plan may not reflect a loss of income sources once the husband dies nor increased expenses the surviving wife may incur in her later years of life.

If you’re interested in estimating about how much money you may need to save each year, try out an online retirement calculator, like this one provided by the U.S. Financial Industry Regulatory Authority (FINRA). You also can contact us to schedule a more in-depth retirement analysis.

 

The content provided here is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice. Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.

Can Longevity Truly be Predicted

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Every morning, Emma Morano ate a raw egg and biscuits. When she died at age 117 in April of this year, she was the oldest person in the world. She lived in Verbania, a picturesque town situated on Lake Maggiore in northern Italy.

Violet Brown, who was born in 1900 and lives in Jamaica, now holds the mantle as the world’s most senior senior. Like Morano, she resides in one of those beautiful locales that most of us only dream about. Could picturesque surroundings be a factor in longevity?

Surely happiness, time spent with good friends and family and a high quality of life can be factors. But no one really knows how long they’re going to live, which makes it particularly difficult to plan accurately for retirement income.

According to the Society of Actuaries, men who reach age 65 can expect to live to an average age of 86 and women to 88 — but those are just averages. In reality, some won’t make it to their predictive age and others will live longer. Which will you be?

As financial advisors, we understand the dilemma of planning for the unknown because it’s what we do every day. If we can help you develop a retirement plan, please contact us for a financial review.  We can help you stay focused on your long-term goals and work with you to design a specific plan using a variety of insurance and investment products that help you work toward your desired financial future.

One tool to estimate your lifespan is the Actuaries Longevity Illustrator. Based on a few simple questions regarding health and demographic characteristics, it offers a series of percentages predicting your chances of living to various ages.

If that’s too broad in nature, you might enjoy completing a more detailed questionnaire at the Biological-Age calculator. Based on how healthy a lifestyle you lead, this calculator knocks years off your current age for an estimate of how well your body is holding up.

The Living to 100 Life Expectancy Calculator (livingto100.com), which was developed by Dr. Thomas Perls, of the New England Centenarian Study, asks 40 questions about health and family history to help estimate how long you may live based on researched medical and scientific data.

If you’re concerned about getting older, here’s a bit of good news: People tend to get happier as they age. In a poll earlier this year, people age 70 and older said their quality of life has improved as they’ve aged. This could reflect the sentiment many people feel who either never enjoyed working or are simply happy to stop.

Either way, it’s probably more uplifting to stop thinking about the limitations of getting older, and reflect more on the advantages we can enjoy that were denied us at younger ages.

Insights From Buffett’s Annual Shareholder Letter

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In February, Berkshire Hathaway CEO and 86-year-old billionaire investor Warren Buffett, known as the “Oracle of Omaha,” published his annual shareholder letter. This yearly narrative is widely recognized not just for its predictive precision, but for his ability to share investment insights in terms the average person can understand.

This year’s letter offers the following insights:

Respond appropriately to your concerns

In the past, Buffett has stated, “Be fearful when others are greedy and greedy when others are fearful.” This year, he reminds investors that acting on your concerns is appropriate only in certain contexts. Widespread concern can present investment opportunities, but personal concern can cause you to miss them.

Increase profit margin

When gains are volatile, investors can still produce investment results by reducing expenses charged by some securities products and service providers.

Buy and monitor

While Buffett enjoys a traditional buy-and-hold reputation, his colleagues note that he does not hold indiscriminately — he constantly reviews and monitors to ensure value is sustained.

Crayon test

Buffett has historically been reluctant to invest heavily in the technology sector because he believes in investing in companies with products or services that can be described simply to a child. However, this year he has increased his company’s holdings in Apple. The billionaire himself doesn’t own an iPhone, but it’s likely he’s seen parents hand them over to small children to keep them entertained.

America will persevere

Buffett has unfailing belief in America’s growth prospects, based largely on the country’s relative success since its beginnings 240 years ago. While the current presidency and corresponding legislative, judicial and economic landscape may appear somewhat volatile and unpredictable, he believes the governmental and market systems put in place will sustain growth over time. Presidents and politicians come and go, yet the United States continues to persevere.

 

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. It’s important to consider any investment within the context of your own goals, risk tolerance, investment timeline and the composition of your overall portfolio. This information is not intended to provide investment advice. Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.

Learning That can Last a Lifetime

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One of the difficulties people faced during the recession was the high level of unemployment. However, a long-term benefit is that some people became more flexible about what they were willing to do to earn a living.

College-educated millennials accepted unplanned forays into things like bartending, graduate school and opening their own small businesses. Many midcareer professionals who lost their job went back to school to study in a different field, thus launching the concept of pursuing two or more careers in a lifetime.

This lesson wasn’t lost on baby boomers; plenty of mature workers seized the opportunity to expand their knowledge and pursue a new career path. In fact, learning is one of those things that doesn’t have an age limit. College towns are generally considered great places to retire, where seniors enjoy a wide range of activities from auditing classes and guest lectures to attending cultural events to using the campus gym.

If you check out your local library, you’ll likely find a plethora of courses available in the community such as computer lessons, religious studies, arts and drama activities. If you don’t want to leave home, check out the wide range of options available online, such as the popular Master Class series that offers video courses taught by knowledgeable professionals and even celebrities.

Retirement is a great time to pursue an activity you have always been interested in and further your education. Lifelong learning opportunities also give older adults a way to meet other people with shared interests and create a regular schedule of activities and social engagement.

Most people have a subject they’ve always wanted to learn — how to play the guitar, dance the Tango, speak French — but were always too busy to truly pursue it. A great benefit of retirement is the time that’s available to finally help make those goals a reality.