Let’s say you have an inherited IRA, and you’re forced to take a required minimum distribution under the new 10-year rule from the secure act. What should you do with it? Today we're going over a tax planning idea. So let’s say that you have an inherited IRA. Under the new rules of the secure act, you must take a required minimum distribution during the first 9 years and a complete distribution in the 10th year. Keep in mind you cannot do a Roth conversion with an inherited IRA. But are there some other tax planning ideas you can do? What about this? What if you did a Roth conversion on your own IRA and chose not to pay the taxes out of the IRA money but instead used the required minimum distribution from the inherited IRA to pay the taxes on that Roth conversion Let’s go over an example. Let’s say you inherited a $200,000 IRA from someone who is not your spouse. You are required to take a minimum distribution in the first nine years and then take the full balance in the 10th year. The first question is to figure out do you want to take minimum amounts for nine years and take a really large amount in the 10th year? Or do you want to split it up and do 10 equal payments because, remember, the distribution is taxable? Doing 10 equal payments may work out cheaper than doing nine small payments and a really large payment in your 10. This is an instance where you will want to look at your tax bracket and your taxable income to figure out what is best for you. For this example, we’re going to use 10 equal payments. Let’s say for this example that the account is growing at 5% a year. So you start off with $200,000, you take out 1/10 of it which is $20,000 as the first-year distribution. The remaining $180,000 is going to grow at 5%. And so on. In this first year, when you take a $20,000 distribution, you have to pay taxes on it. For this example, let’s assume you’re paying 22% federal and 5% state taxes. That means that after taxes you will receive $14,600. You could use that $14,600 to pay taxes on a Roth conversion on your own IRA. To do the math, if we are still assuming that you’re in the 22% federal and the 5% state tax, you could do a $54,074 Roth conversion. The taxes owed on that $54,074 Roth conversion would be $14,600. So even though you can’t Roth convert an inherited IRA, you can use the proceeds of the Inherited IRA distributions to pay taxes on your own Roth conversion. This is an example of using the rules of the tax code to your advantage. This works well for somebody that is under the age of 59 1/2. If you do a Roth conversion and you’re under the age of 59 1/2, you cannot pay the taxes out of your IRA because that would be deemed as a distribution which would be penalized with a 10% penalty. However, paying the taxes on a Roth conversion with distributions from the inherited IRA is a legitimate way to pay the taxes. This slight difference might allow you to do a Roth conversion when otherwise you wouldn’t. If you’re under the age of 59 1/2 and you want to do a Roth conversion, you have to have cash available to pay for the taxes. Using distributions from an inherited IRA may give you that cash needed to be able to do the Roth conversions. So can everybody implement this strategy? Well no. You have to have an inherited IRA to be able to do this. But this is just an example of thinking outside the box to accomplish the goals that you have. If you want to work with somebody that thinks outside the box, and that wants to help you figure out ways to accomplish your goals for retirement, go to Look over on the right side of the screen and click talk to an advisor. Fill out your information, and somebody will be in contact with you soon. If you want to reach us by telephone, call the number on your screen, and if you don’t get an answer, please leave a message. This is Mel Stubbs. I’ll see you in the next video. The information provided is not intended as tax or legal advice. Figures shown are for illustrative purposes only furthermore, the information nor the illustrations provided may not be used to avoid any tax penalties. This content represents the general views of Christy Capital Management and should not be regarded as personalized investment advice Nothing herein is intended to be a recommendation. The opinions expressed are subject to change without notice. Retirement Benefits Institute, Inc., and a portion of its contents merged with Christy Capital Management Inc. Brandon Christy, former President of Retirement Benefits Institute, is also the current President of Christy Capital Management, Inc, a registered investment adviser....(read more)
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Inheriting an IRA can be a complex process, and one of the biggest decisions you’ll have to make is what to do with the required minimum distribution (RMD). The RMD is the amount of money you must withdraw from your inherited IRA each year. How you manage your inherited IRA RMD can have a major impact on your financial future. If you’re inheriting an IRA, it’s important to understand the rules and regulations that come with it. The RMD is determined by the Internal Revenue Service (IRS) and is based on your age and the size of your account. The amount of the RMD increases each year and is calculated using a formula based on the value of the account and your age. When it comes to managing your inherited IRA RMD, you have several options. You can take the money out of the account in a lump sum or spread it out over the year. You can also choose to roll the money over into another IRA or invest it in stocks, bonds, mutual funds, or other investments. If you decide to roll the money over into another IRA, you’ll need to work with a financial advisor or a financial institution like Christy Capital Management. At Christy Capital Management, our experienced advisors can help you understand the rules and regulations that come with inherited IRAs and guide you through the process of rolling the money over into another IRA. Another option is to invest the money in stocks, bonds, mutual funds, or other investments. This can be a great way to grow your money over time and potentially increase your retirement savings. However, it’s important to understand the risks associated with investing and to work with a financial advisor to make sure you’re making the right decisions for your financial future. No matter which option you choose, it’s important to understand the rules and regulations that come with inherited IRAs and to work with a financial advisor who can help you make the best decisions for your financial future. At Christy Capital Management, our experienced advisors can help you understand the rules and regulations that come with inherited IRAs and guide you through the process of managing your RMD. Contact us today to learn more about how we can help you make the most of your inherited IRA. https://inflationprotection.org/what-to-do-with-inherited-ira-required-minimum-distribution-christy-capital-management/?feed_id=70197&_unique_id=63ea05aeb4195 #Inflation #Retirement #GoldIRA #Wealth #Investing #BrandonChristy #federalbenefitstraining #federalretirement #federalretirementtraining #fersplanning #fersretirement #FERStraining #RBI #RetirementBenefitsInstitute #retirementplanning #InheritedIRA #BrandonChristy #federalbenefitstraining #federalretirement #federalretirementtraining #fersplanning #fersretirement #FERStraining #RBI #RetirementBenefitsInstitute #retirementplanning
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