time for it to grow. I’ll tell you more about that in a second.
So, okay, who can do an IR a Roth conversion? Frankly, anybody can. There’s no age limits, high or low. There’s no income limits, and there’s no requirement to be working. Anybody can do it. So, if you’re newly retired and you’re in a low year, a low income year, hey, a lot of people use those first few years of retirement to really take advantage of it when they’re in a low tax bracket.
But now, here’s the risk is well um well, here’s the reason why you may want to do it. Let’s say you do, let’s say you’re doing $100,000, right? Now, let’s say you’re in a 22% tax bracket. Okay? If you’re in a 22% tax bracket, okay, that’s going to cost you $22,000 to do. So, you know, gee, Bill, that’s that’s expensive. Why would I want to do that? Well, because now it cost you $22,000 to convert that $100,000 from pre-tax to post tax, right? Okay, let’s say you’re 55 years old when you do this. In or whatever age you do it, it doesn’t matter, but you do it today, right? In 7 to 10 years, that money should double. So, your 100,000 will now be 200,000. Remember the rule of 72. how long it if you’re making between 7 and 10% that money is going to double in 7 to 10 years, right? Okay. So now that 100,000 is now 200,000. What’s the taxes you paid on it? 22,000 or the effective rate that you paid is 11%. Give it another 7 to 10 years. Now that 200,000 is 400,000. What’s your taxable rate? it ends up being 5 a 12%. That’s why it makes sense to do a Roth conversion if you can. But there are a couple of things that you need to make sure that you have in mind. Um, one, um, you got to make sure it’s not going to hit you up into Irma if you’re 63 or older. You know, remember I said there’s a 2year look back for that. So, be aware of that. I go a lot more deeper in in other webinars on this. Um, and the other big advantage of it is is you decide when you want to take distributions. There’s no RMDs on it. It allows your account to grow uninterrupted taxfree for the rest of your life and it provides a tax-free inheritance to whoever you want it to go to. So, it’s all taxree. So, good good reason to do that. Now, I’m going to go on this briefly. Used to be that it didn’t matter when you did an uh a Roth conversion because at the end of the year, if you ended up going over or hitting an Irma, you know, tax bracket, you could reccharacterize it and and change it before the end of the year. After 2018, they changed that. So, now you cannot do that anymore. So once you convert to a WTH and do that Roth conversion, you’re stuck. So that’s why I usually say wait till the end of the year when you know what your tax situation’s going to be because if tax bills higher than you thought it would be, well, thanks for playing. You’re out of luck. You accidentally fas yourself out of a credit or income dropped, you know, investments dropped in value after you converted, change your mind for whatever reason. Well, thanks for playing. We have some lovely parting gifts for you. Pay your taxes. So, here are the things that you want to ask. Three questions you want to ask of, you know, before converting is number one, uh, do you have a rough idea what your conversion impact is going to be on your tax bill? Do you have a plan to pay the resulting taxes? Preferably, you want to use money that’s not in your IRA money to do it. you want to take money that’s out of it. Um because you really want to take you really want to keep as much of that in the IRA as possible to really take advantage of it growing. Um also do you have a reasonable expectation that the benefits of prepaying your taxes like this make sense in your overall plan? In other words, do you have time and do you have other money to live off of to so that you don’t have to take the you really need for this to really take advantage, you really need to leave it in for at least seven of 10 years to really makes to have it make sense. So the answer to all three of these questions should be yes. If it is, then it could make a lot of sense to do. Now, doing the whole thing at once, that doesn’t necessarily make a lot of sense to everybody. But here’s what I would say is whatever tax bracket you’re in, fill it up to the next level. This way, you’re not adding, you know, you’re not go and sometimes it could like if you go up into the 24% tax bracket, I have no problem with that. I’ll pay an extra 2%. Because if you go into the 24% tax bracket, you’re not necessarily paying 24% tax on everything. It’s only the portion that’s in that bucket. So yes, it costs you a little bit more to do, but the tax savings in 7 to 10 years, maybe even more. So, you know, once you get into your higher tax brackets, then it doesn’t make as much sense, but it depends on how much time you have. So, there you go. So, couple of things you want to look for when you’re doing Roth conversions is you want to look for low income years if you can. So maybe if it’s your first few years of retirement, but before receiving your social security benefits, pensions, or other, you know, IRA distributions, that might be a good time if you’re a business owner with unusually low sales or unusually high expenses or if you had a non, you know, really high non-recurring medical bills in one year where you get that, you know, you get a deduction that’s really lowering your taxes. Those are all reasons. Hey, you know what? I’m in a low tax bracket this year. Let’s take advantage of this. So, all right. Um, now obviously there are limitations to this. These strategies aren’t for everybody. As you can see, there’s no guarantee that a Roth conversion will achieve the intended results. So, just do a little planning before you, you know, before you just willy-nilly go for it.
All right. Um, okay. Now, when you’re rolling over IAS, there’s two ways to do it. You can do it indirectly, an indirect rollover. It’s essentially known as a 60-day rollover. You can shortterm loan. You can take the money out, take the money. You’re essentially giving yourself a 60-day loan, but you better make sure that you get it in within 60 days because if you don’t, then it’s a taxable event, and they’re going to want their money. A cleaner way of doing it is doing a direct rollover or a trusty torustee transfer. Essentially, what you’re doing is is you’re telling your 401k or your company, they will send it. They won’t send it to you. I mean, they may send you the check, but the check won’t be made out to you. It’ll be made out to here. Here’s here it is right here. It’ll be made out to your IRA for the benefit, you know, it’ll be made out to whatever company you’re transferring it to for the benefit of your IRA. So, even though they may send you the check, the check won’t be made out to you. So, essentially, here’s how it works. Is when you do a indirect rollover, you’re getting the money out. If now you take it out of a 401k, they’re probably going to take a 20% mandatory withholding. You get the money back once you roll it over, but you got to wait till the following year to get it back. So, I would say it’s better it’s better to do it. It’s just cleaner unless you really need a short-term loan. Do it this way where the funds go directly to the new, you know, your new IRA. and you you know even if they send you a check it’s not made out to you. It’s not a taxable event. You can’t cash that check. So there you go. All right. Now coordinating your IRA planning should be it should be with all of your aspects aspects of planning. Um you know your overall retirement plan, your estate plan, your tax planning, education planning, it all you know you want to make sure it all coordinates together. Um, so
the last big thing I’m going to go over here, there’s a few other things that I’m going to zip through because I know I’m getting close to the end of the hour here. Um, but and I try and I try and really honor your time. Um, I’ll stay on for as long as I see I got a bunch of questions, so I’m going to stay on as long as you guys want, but I’m going to try and get this wrapped up within within the next um within the next few minutes. So, I may go a little quicker on a few things. Um, it’s not just what you own, but where you own it. Now, this is a really important concept that a lot of people just don’t understand. Let’s say you have $200,000 total in your retirement. You have $100,000 in an IRA and you have $100,000 in a nonirra. You’re in a 24% tax bracket. You want to own $100,000 of investments in a hypothetical 4% interest rate, right? And then you also have $100,000 of stocks paying you a hypothetical qualified dividend of 4%. Okay, what’s the difference? Does it matter? Well, let’s take a look. Scenario one, you essentially have all the stocks are purchased inside the IRA account, which a lot of people do because they think, “Oh, I’m going to put my stocks in IRA and they’re going to generate $4,000 of qualified dividends. Great.” In general, qualified dividends receive special tax treatment and are taxed at long-term capital gains rates. So these rates are lower in they’re they’re typically lower than ordinary tax rates. So because this income is made inside an IRA and all the withdrawals inside an IRA are taxed with ordinary income, you really lose that benefit. So with that in this case, you’re taking out the four $4,000 of your IRA withdrawals of your dividends. Okay? You’re in a 24% tax bracket. Your tax bill is $960 out of your IRA. Your other $100,000 is earning the same amount, 4% in bonds, paying 4%. Okay. Well, that’s interested ordinary income. So, okay, it doesn’t matter whether you take it one or the other. Your taxes are going to total up to 19, you know, 1920. Okay. Well, let’s say we do the opposite and we say, “Okay, we’re going to keep the 100,000 in the bonds. We’re going to put the bonds in the IRA.” You’re still going to pay the same amount. It makes $4,000. You’re getting $960,
but the ordinary dividends in your ordinary stock account, now they’re taking the capital gains rate, which is 15%. So, you’re paying it’s saving you $360 a year on this amount. So, you may not think that that’s amount, but hey, $360 makes a hell of a lot looks a hell of a lot better in your pocket than it does in Uncle Sam’s, doesn’t it? So all these little things that people don’t think of are ways little things that you can really take advantage of, you know, how you keep your money and diversify from a tax standpoint and make sure it’s you’re really maximizing it. Now obviously there’s no guarantee that the investments will perform as ex you know all the disclaimers are out there. Um, you know, not all dividends qualify for taxation of long-term capital gains rates. You know, talk to your qualified tax professional or uh, you know, but I I can tell you which ones as well when it comes to investments at least. So, and it’s no no guarantee that obviously the tax rates are going to stay the same. So, just be aware of that. Okay. A lot of people don’t properly evaluate the decision to apply for social security benefits. Um, this can be a major mistake and in one, you know, it can cost you more than $100,000 of income over the course of your retirement. So just be aware that social security is one of the best it’s the cheapest annuity I’m using my finger quotes here that you can buy because typically what’s happening is the price compared to other assets used to delay social security. Social security it grows at 8% a year. Now granted it doesn’t always make sense to wait. It depends on a few things and I go through this I do a whole webinar on social security where you know it really depends on one your need it depends on your health your life expectancy there’s a whole slew of reasons but and but just know that you know at least no matter how much you’re making at least 15% of your social security benefits are going to be tax-free.
So you want to really take advantage of that as much as you can. Um the other thing is you want to coordinate your IRA planning with estate planning. Now the big thing with this is is that most people think that okay well your spouse you know um when you are you know on your beneficiary form um IAS avoid probate you know so it goes directly to your uh goes directly to your beneficiaries. Now, the biggest mistake I see a lot of people make with IAS is they do a trust and then they create they name the beneficiary is their trust. Why would you want to why wouldn’t you want to do that? It’s cleaner, right? Well, here’s the problem with that. Beneficiaries in an IRA, when you get a beneficiary to an IRA, I’m going to tell you in a second. Okay? So, if it’s your spouse or any one of these other categories, but primarily it’s your spouse, they can essentially take it and they have the ability to stretch it out over the course of their lifetime. Great. Okay. Well, if it’s not, if it’s your kids or a family friend or whatever or something like that, well, then they can essentially take it out over the course of they can take it. So, if it’s a spouse, she can just or your I say she because women always outlive us. Come on, we all know that. So what happens is is that when you um so when your spouse inherits it, they can essentially treat it as their own. They have the choice. They can either keep it in a beneficiary IRA where then they can take they can take it out over the course of 10 years, right? Or or they can treat it as their own. they can roll it over to their own and if they’re as long as they’re of 59 and a half, you know, they can then take it out over the course of their lifetime. So, you have the choice of whether or not you can do it if it’s a child or a friend or some other family member beyond a spouse. Well, essentially what happens is is you have 10 years to take it out. So, just be aware that you have 10 years. You can’t just take it out over the course of your lifetime. Um, so why would they want to remain as a beneficiary instead? Well, if they remain as a beneficiary, then they don’t have to wait till 59 and a half. They can take it out whenever they want. They can just do it over the course, you know, and they have 10 days to 10 years to do it. Now, here’s the biggest thing I want you guys to know about IAS is that there’s a lot they are a big target for scammers. The reason is because they’re a huge part. Your house and your retirement are your two biggest assets, which means it’s a big target for scammers. There’s a lot of people out there trying to, you know, get a hold of you and do all that. So, just make sure you talk to someone who knows what they’re doing. Any questions, problems, complaint, come talk to me anytime. I’m here to help. So, with that, um, I know I kind of rushed through the last part because I know I’m going over a little bit and I wanted to I wanted to really, you know, value your time. I try and wrap these up in a in an hour and I know I have a ton of questions here. So, um, with that, if you have any questions at all or if you want to do a plan or if you I’m going to get to all your questions. I see that I have a ton of questions here. There’s a couple of things you can do. Um the first thing is you can um oh one if you are uh if you want to do a plan with us um make an appointment. I’m happy to sit down with anyone and it doesn’t cost anything to sit down with me. It doesn’t cost anything to make a plan. It doesn’t cost anything to, you know, do estate planning or any of that. We’re here to help. And um now that being said, we’re a we’re a nonprofit. We’re not a charity. But the one thing, you know, so the profits we do make instead of paying off shareholders or lining the golden parachutes of our corporate executives, it goes back into serving you. So with that, if when you come and make an appointment with me, there is no cost to that. There’s no cost to do a plan. When we do a plan, I will certainly make suggestions to you. But whenever I make a suggestion, I will always give you three things. Advantages, disadvantages, and the cost. Sometimes that cost is a is a fee. Sometimes that cost is time. Sometimes it’s both. But you need to know what each one is to make an informed decision. So I always I will always there’s never an obligation. So, you know, if you just want to sit down and ask me questions, I’m I’m easy. I’m a low pressure guy. So, with that, all right, so let’s get to the questions. I know I ran a little long. I apologize, but okay. Um, so, oh, if you want to make an appointment with me as well, there’s a couple of ways to do it before I last thing before I get to the questions is you can either do this QR code. This will give you to get you to my email. I mean, it gets you to my calendar. Pick a time that works for you. Pick a 30 minute window and we can sit down and you can ask me whatever you want. Um or if you also the other way to do it is um you can I see a bunch of people already requested an appointment. What I request from you in doing that way is just put in either the Q Q&A or the chat. Just put down phone or email. Lets me know how you best want to be contacted. So, all right, let’s get to questions here, shall we? Okay. So, the first question here is from Michael. Okay. Michael asks, “Are social security payments are social security payments contributions that can be deposited into a Roth IRA?” They can be. Um, but you have to have earned income. So, you can’t use social security payments only to fund an IRA. You have to have other earned income. So now you could use your social security payments if you’re converting. You know, you could use those social security payments to to pay the taxes. You could do that, but you can’t use it to fund an IRA because it’s get that’s not earned income. Hopefully that answered your question. Okay. Can an annuity be considered a contribution uh can be a deposit to a Roth? You can do a Roth IRA in an annuity, but you can’t just use annuity proceeds. Again, it’s got to be earned. It’s got to be compensated income. So, you have to have a job that you made some sort of compensation. either it’s personal income or a salary or something that you went out and got paid to for doing work that you’re you’re you know that you’re going to be taxed as ordinary income to the government to fund that. It can’t just be a passive investment or social security or anything like that. But great question. Hopefully I answered it. All right, Michael has another question here. How do you defer RMD and how do you calculate RMD? Well, hopefully hopefully I already answered that. Um, I’ll go through that individually with you, Michael, if you if you want make an appointment with me and I’ll go through that where we can say, okay, take a Well, here I’ll do it here. Uh, let’s see if I can go back here. Essentially, what you do is where is it? Okay, RMDs. So, all right. So, what you do is you take the end of your year balance, your December 31st balance, and then you take your life expectancy factor. You take that factor, you divide into the into the end of your balance. That’s how you get your RMD. Now, that being said, come, you know, just just ask me and I’ll I’ll help you figure it out as well. All right. So, let’s get back to here. All right. Back to questions.
Hold on. Sorry. There we go. Okay. All right. Uh
All right. Next question is from Anonymous. Hello, Anonymous. Um, can you also help Can you also help if self-employed and before only work part-time with no retirement account, now divorced and only received 50K in an IRA account and with a big mortgage, you know, um, anonymous sign up for, you know, take the QR code, put on my and I’ll go through it individually with you cuz sounds like you have a specific need that you want to solve and I don’t know if I can just take this from um I don’t know if I can just take this from your question here. So um make an appointment with me and I’m happy to go through it with you individually with you. Um okay, next question is from RA. Hello RA. I’m retired and I only have a small amount of traditional IRA um and didn’t want it to be taxed. I rolled it into Schwab. Now what? Um I have annuals of 25K just sitting there. Okay. Well, sit down uh sit down and have a conversation with me. I can one I’ll help you kind of if you want to keep it with Schwab I’ll I’ll certainly answer any questions with you. Um if you want to know what some other options are here I’ll explain what those are as well. Uh but make an appointment with me and I’m happy to sit down uh sit down and and help you. It’s I don’t know what question you’re really asking me other than you want to know what you should do and I’m going to need some more information from you to give you that answer RA. All right. Um, moving onward. Okay. The next question is from anonymous again. Uh, maybe it’s another anonymous. Um, can I roll over a 403b into a new Roth? If so, does it does it matter before retiring or during? Um, yes. The answer is yes, you can. You can do it all at once or you could do it over time. It it does matter. It doesn’t matter if you do it before retirement or during retirement. It matters what your tax bracket is when you do it. That’s the key thing. So, you want to max, you want to really manage what your tax liability, and you also want to make sure you’re not hitting any of those pitfall sir charges like, you know, Irma or something like that. Um, so yes, but the answer is yes, you can absolutely do it. All right. Um, okay. Michael’s on the horn again with uh can Roth conversions be done incrementally? Absolutely they can. In fact, if you have a large amount that you want to do, typically I would say, yeah, you want to do it over a few years so you’re not killed with taxes all at once. So, yeah, I would say create a plan on how to do it if you want to do it. And you may not want to do all of it. Like, you may want to keep some of it as traditional IRA. Why would you want to do that? Here’s why. Because let’s say, remember I said I’m going to be doing um a webinar in a few weeks on long-term care. Well, if you have a long-term care issue, I’m going to give you a sneak preview to that. If you have a long-term care issue, well, you want to keep some of it in your traditional IRA. Why? Because anything you’re paying for long-term care is going to offset the income that you’re going to get from taking it out of your IRA. So, if you have, let’s say, $60,000 a year to come out of your IRA to pay for help pay for your long-term care. Well, okay, that $60,000 you’re taking out of your IRA is going to be offset by the $60,000 a year that you’re using for those expenses. They’re deductible. So, it’s going to offset the cost of that. So, essentially, it’s taking out your traditional IRA taxfree. as long as it’s for that reason. So that’s why, hey, you may want to still keep some money in your traditional IRA. That’s why it’s so good to do a plan so you can kind of see what the, you know, I’m going to think about these because that’s is all I do is I plan for these things and I help you plan for them and I kind of see what are the whatifs and help you kind of so you don’t have to kind of fish through them yourself because I know listen your head’s probably spinning. We’ve been on for an hour and 15 minutes now and your head could be spinning by all the different options out there. That’s what I’m here for. I’m here to help walk you through them. So hopefully that answered your question there, Michael. Okay, getting onward and upward to the next question. Okay, can still add anonymous again here with can. Okay, can I still add to a 403b that is doing well even if I don’t work at the company anymore? No, you got to be working for the company to contribute to a 403b typically. Um, that’s one of the benefits of being at a 403b. The problem is is that when you’re no longer working there, no, you can no longer contribute to it typically. Um, now you can, if you’re still working, hopefully your new company will have a 403b. You can certainly do that or you can roll it over to an IRA and, you know, and keep hopefully invest in the same things, you know, the same type of investments within your within your IRA. Um, so no, but you can’t keep contributing to a 403b if you’re no longer working there. Um, okay. Lucy asks, um, “Is it worth it to convert in a higher tax bracket now to lower the IRA balance and avoid future survivor tax bomb?” I would say, Lucy, that’s a great question. The answer is, it depends. It depends on your personal situation. I would say do a plan so we can figure out what that answer is for you. Cuz for one person, it may make sense. for the next person next to them. It may not. So, that’s a personal thing and I would say, you know, let’s sit down and we’ll talk about it. Okay. Uh, all right. Carolyn asks, “Am I taxed on a pension as I am? my tax on a pension as I use it to pay for a long-term care facility. Um, no. Well, typically anything you’re paying for a long-term care, if you’re paying for a long-term care facility, it’s going to offset, it’s going to be taxdeductible. So, whatever taxes you’re paying is going to be offset by that. So, you know, if your pension’s taxable, it’s the same thing. It’s going to be it’s going to it’s going to come off your taxes. So, because it is it is a taxdeductible thing. So, now granted, I’m putting on my disclaimer hat. I’m not qualified to give tax or legal advice. For tax or legal advice, please talk to your qualified tax and legal professional. Okay. Um, Anonymous is coming in with the questions here. Okay. Anonymous asks, um, when in the year do you take the distribution or do you roll it over to continue investing? I’m assuming when in the year do you take the distribution or do you roll it over to con continue investing? Your you mean your RMD, your required minimum distribution. Is that what you’re talking about? Um, you can take them out, whatever works for you. Some people take it out on a monthly basis. Some people take it out on a quarterly basis. Some people take it out once a year. Some people take it out on their birthday. It’s up to you. Um if you’re if that’s what you’re talking about. Um that’s what I would say. And roll it over to continue investing. I mean, you can take if if you’re talking about an RMD because I I assume you’re take you’re talking about a distribution, right? So, uh, oh, Janice, should you do a 30 or 60 minute? I would say start off with a 30 minute appointment. Great question. Um, start off with a 30 minute. If you need to do 60, I’ll I’ll run a little long for you, but most of the first initial appointments are 30 minutes. Um, okay. So, hopefully I answered your question, anonymous. Um, feel free to make an appointment if you if you want to go into it a little further or just clarify the question for me. Um, okay. All right. So, next question. All right, Jan, I answered yours. Do a do pick a 30 minute appointment to start. Uh if you want 60 minutes or more if you’re doing a plan when I I’ll do I’ll take 60 minutes to go over your plan with you. Um that’s usually what it is. Um does it make sense to anonymous again uh does it make sense to consolidate SE IAS from two different accounts? What is the upside of doing it? Um I mean people just do it because it you you know just because you consolidate accounts doesn’t mean you know you’re less diversified. Your diversification comes from what you’re investing it in. It just means that you’re going to get one less statement and you have one less account you got to worry about. Um so yeah, I would typically say a personal I mean it’s a personal choice. Some people like to have it in separate accounts, some people like to consolidate it. Um, as they get older, people, most of my clients want to consolidate their accounts. So, hopefully that answers your question. Um, all right. Lot of good questions here today, folks. Um, again, I’m going to be on for a little while longer. I’m going to open up the lines if people want to ask me just individual questions. Um I’m happy to do so. I’m also going to be keeping these open. So if um so if anybody um if you have a new question coming in, I will I will be on for a few more minutes to answer these questions. Um that being said, I know I ran a little bit long, but you guys had some great questions. Uh, and I did wanted to get through a good portion of, you know, I had a lot of information I want to get to. So, thank you for hanging in there with me. Have a great night, everybody. And, um, if I don’t see you sooner, I’ll see you in two weeks. Good night, everybody.
All right. And that being said, if if I’m going to open up the lines if anybody wants to say hello or ask a question, uh, just unmute yourself. at the bottom of the uh at the bottom of the your screen, you’re going to see a little microphone. Click the microphone and it’ll tell you to uh
uh there you go. It will So, if you if you just want to say hello, feel free to say hello. Everybody’s Everybody’s unmuted, so feel free. I’m on my cell phone. I couldn’t scan. Hello, Ra. Hello. I couldn’t um scan for appointment from my cell phone. Oh, okay. Did you uh Okay. So, do you do you have a Oh, so you Okay. So, I’ll tell you what. Well, um So, you can’t scan it cuz you’re on a cell phone. Did you Were you able to uh Well, I’ll tell you what. I’ll I’ll just add you to the list of and I’ll I’ll reach out to you via your email. Oh, okay. Thank you. You know, or or I mean, yeah, because I don’t I don’t want to do it right now because there’s there’s other people on the line and you know, but but if you you know, but I’ll I’ll reach out to you probably tomorrow cuz it’s getting a little late for me now and my dogs are waiting at home and so is my wife. So, I don’t want either one of them barking at me. So, I’ll probably I’ll probably respond tomorrow and I’ll get a I’ll get an email out to you with a with a link to my calendar where then you can pick a time that works for you. Okay. Okay. Sounds good. Ra, thanks for coming. Is this your first time on um with
Is it the first one? Cuz I haven’t seen your name before. With other people from a line. Oh, so you’ve been on with other people of the line. Okay, that’s good. Okay. Um, well, hopefully like we’re all different. We all have different personalities and and things like that. So, you know, but if you want to Yeah. If you want to sit down with me, I’ll I’ll I’ll reach out to you tomorrow with an email and just pick a time that works for you. Awesome. All right. You have a fantastic evening. You, too, Bill. Mara, she couldn’t take a picture of it cuz she’s on her cell phone. So that’s why she couldn’t take a picture of it because she’s on her cell phone. Mara was telling another client was another person on was saying just take a picture of the uh of the QR code. She couldn’t because she’s got uh some. All right, Valerie’s got her hand up. Thanks for a very clear presentation. Um I think that there was a quick abbreviation and understandably on some of the um I forget the technical term for it. These kind of special eligibility categories for inheriting an IRA and whether or not you have lifetime. Yeah, I was getting to the end and I kind of went through uh I went through it rather quickly and I apologize. Right. Well, in a situation where um an individual has uh two children, one um with kind of a lifelong qualifying disability uh that would allow Yeah. Disabled. Yeah. Yeah. And and and the other non-disabled um who would be hit with a you know, kind of probably an illtime tax bill uh from inheriting an IRA. I didn’t quite I mean I know that there are multiple considerations around that um and it’s kind of more preferential to leave um the holdings in an IRA to the person with a disability. Um but what was this about age 59 um with reference to uh No. Oh, okay. Was that in reference to a spouse? That’s to a spousal IRA rollover. So if you’re inheriting an IRA and you’re the spouse, you have you have two choices. You can remain as a beneficiary. Yeah. And just you have, you know, you have you can take it out over the co. So you don’t have to wait till 59 and a half because you’re a, you know, you’re a beneficiary listed. Just the same as, you know, anyone who inherits an IRA does not have to wait till they’re 59 and a half. They actually have 10 years to take it out, pay it out, right? So what I would recommend in that case is usually take it out over the course of 10 years. I do a whole webinar on just these type of things. Not not not all at once if you’re nonis if you’re non-disabled. Um well, if you’re dis if yeah, if you’re non-disabled, do it. Still spread it out over the 10 years. What a lot of people do is they say, “Oh, I want to keep it. Yeah, I don’t want to do it right now. I wanted to keep earning.” And then they forget about it. And then in the 10th year then they have to take out like let’s say okay they inherited a half million and then and they didn’t do anything about it. Yeah. And then you know you could take 50,000 out a year or if you leave it alone for 10 year in the 10th year if it doubles in 10 years now you’re taking out a million dollars in one year. And you know who the biggest beneficiary is going to be? Yeah. Uncle Sam. But but again for a non-disabled individual they don’t have that. I mean for a disabled individual you have 10 years to take it out. But for a qualifying disabled individual they would then they can take it out over the course of their lifetime. So essentially they’ll get it’s kind of like an RMD. Yeah. You know where you can get an RMD and take it out. So if they’re younger the percentage that they have to take out is a lot less.
Okay, I’m getting I’m sorry. I’m getting confused. I thought for for a disabled individual, they could spread distributions over a lifetime. They can. Okay. But there are required minimum distributions over the time. Essentially, if you’re a disabled person, Yeah. If you’re a disabled person or the the beneficiary is a disabled person, Yeah. it’s like an RMD. You can take it out over the course of your lifetime. It’s called stretch. You can stretch it out over the course of your lifetime. So yeah, in the first few years, you’re not taking that much out. I see. But you’re still going on this schedule of life expectancy. Yep. Okay. All right. That’s what I didn’t didn’t get. And then, you know, I guess that there are additional layers of whether or not you’re leaving it to a special needs trust or, you know, um how you’re I stay tuned for my next one. The one that I’m talking about when I’m talking about estate matters. Yeah, I talk all about that because my sister has a special needs trust. Well, my mom has it for my sister who has MS because my my sister, you know, she’s she’s disabled. So, we don’t want it to have it where she gets, you know, she can’t inherit, she can’t inherit everything, but then she’ll lose her disability benefits. So, what we do is, but my mom didn’t want to just cut her out of the estate. So, what we’re doing is we created a special needs trust. So, we the beneficiary is a special needs trust. She can get income from it, but she doesn’t actually own the assets. So that when the day comes from my sister that well then it goes to her kids. Uhhuh. And and it’s, you know, and it’s and it’s not messing with her disability payments. Okay. All right. No, thanks thanks for for for uh clarifying that they they are on a schedule of RMDs over a lifetime. Now, that being said, I’m not qualified to give tax or legal advice. For tax or legal advice, please talk to your qualified tax or legal professional. But yeah, yeah, if I can find if I can if I can find one who can deal with all of the disability related stuff. Um, which is which is hard. Are you in the state of California? I am indeed. And I would love resources. Um, I’m I’m in the San Francisco area. All right. Well, I’m right in uh I’m surrounded by Janentech. I’m just north of the airport. I live in the city. Oh, really? Okay. I’m in San Mateo, so Yeah. Okay. Well, you’re just south of me. I’m I’m just I’m just uh I’m right at Oyster Point. Oh yeah, I know it well. So there you go. So yeah, you don’t have to do it via Zoom. You can come and see me in person. Well do that these days, but I I welcome it. Thank you. Thanks a lot for the presentation. Glad you’re here. All right. Bye bye. All right. Take care.
All right. Any last questions here? Okay. Let’s see. Let’s see. Margaret asks, “Oh, okay. Hold on.” Uh, when am I do Okay. Mara asks, “When am I doing Oh, Mara, you’re not there anymore. Sorry.” Uh, yeah, I’m doing the Well, she’s not there anymore, so I’ll I’ll reach out to her individually and let her know. Um, all right, Janna, I’m glad that you made an appointment. Um, all right. And uh that being said, if anybody else has any questions, I’m going to be on for a couple minutes longer, but I’m just gonna I’m gonna respond to an email. I There’s a few people left on. I guess you’re just either you fell asleep or you’re on the uh either you fell asleep or you’re uh just waiting around for any last minute nugget questions that anybody else asks. Either way, it’s okay with me. All right. So, let me just get back. Oh, darn it. I Okay. Well, I’m gonna get off that. So, let’s see here.
You’re welcome, Carolyn.
Jason, Rob, are you guys there or uh I see you’re still here. I don’t know if you’re waiting for last minute nuggets or you just fell asleep or you left, but you’re still on. Well, if you want to say hello, feel free.
I’m just going to finish up this email. So, unmute yourself and ask a question or or put it in the thing if you want to talk. All right, it’s let me finish this email.