If you’re like most Americans approaching retirement, you’ve been busy contributing to your IRA or qualified plan. You have successfully pushed your income taxes into the future, but the tax collector is knocking on your door and you can’t ignore him any longer. Remember that at age 70 ½, required minimum distributions (RMDs) must begin, and Uncle Sam finally gets his share. Once the process of withdrawing from your IRA begins, one of three things will happen: “You will live on it, leverage it, or not benefit from it”.
Some retirees must live on their IRAs. These IRAs will be completely tapped out and nothing will be left over and they will not be able to leverage their IRA because every bit of it will be used.
Some seniors do not need to live on their IRAs and if they weren’t required take their RMD’s would opt to pass the asset on to their loved ones and charitable causes.
Multi-generational wealth transfer of a traditional IRA can only be accomplished through the implementation of a strategic plan. The unfortunate truth is that the majority of IRA owners in America have no plan in place that will allow them to optimize their retirement savings and help them mitigate taxes. They will take out their RMD each year and upon their death, without proper planning, they will LOSE their IRAs to taxes, spendthrift heirs, and lost opportunity.
Lack of planning for the inheritance of an IRA not only hurts the owner, but it creates a host of problems for the inheritor. Most IRAs are cashed in at death, this value is added to the heir’s taxable income in that year. Realize that the new tax rate is applied not only to the inherited IRA money, but also to all of their earned income for that tax year. Add to that state income taxes, and you have a tax nightmare.
The typical inheritance is spent anywhere from 93 days to 17 months. A lifetime of your accumulation and earnings can be gone in a flash. However, losing the IRA to taxes and spending can be avoided through proper planning and leverage.
Family is the most precious commodity and concern for the welfare of children and grandchildren is at the front of most parents’ minds. This generation and future generations are in a tough situation. The turbulent financial horizon promises increased taxes, market volatility, low interest rates, skyrocketing health care costs, and greater longevity. What will retirement look like for your children and grandchildren? If you could be the solution to their troubled financial future, wouldn’t you want to know how?
Your IRA, 401(k) retirement plans are valuable assets that can be positioned to not only meet your financial needs, it can also meet the future retirement needs of your children and grandchildren. With leverage, you can make one dollar do the work of many. Instead of Uncle Sam being the largest recipient, why not create a legacy that will impact your family for generations to come?
There is no getting around the RMD. You must take it every year and pay the tax, based on your current tax bracket. But, with proper positioning, your after-tax RMD can become a valuable financial tool. By using this income, there are ways to create a substantial family legacy that provides a tax-free inheritance for your loved ones.
Another form of leverage for your IRA is to extend the payout over multiple generations. Upon your death, proper structuring creates an asset that keeps giving and giving. Imagine what it would be like for your children and grandchildren to receive a check from you on their birthday every year for the rest of their lives.
There’s no better time than now to create a well-defined plan for your IRA.