Take the 70 1/2 Quiz!

Posted on by in Estate Planning, Income Tax, IRAs, Tax Law.

Many individuals with large IRAs understand that 70 1/2 is the magic age at which they have to start taking required minimum distributions. Unfortunately, these people often underestimate the complexity of the tax laws regarding this issue. Therefore, please take a few minutes to complete this 70 1/2 Quiz!

  1. At what date must you begin taking minimum distributions from your IRA?
    1. 70
    2. 70 1/2
    3. April 1 of the year you turn age 70 1/2
    4. April 1 of the year after you turn age 70 1/2
  2. Should you usually wait until this date before you take out your first minimum distribution?
    1. YES
    2. NO
  3. What is the penalty if you do not take out enough?
    1. 10%
    2. 25%
    3. 50%
    4. 75%
  4. Who can you name as beneficiaries to your retirement account?
    1. Spouse
    2. Children
    3. Grandchildren
    4. Pets
    5. Any or all of the above
  5. If I name my wife as 50% beneficiary, my son as 25% beneficiary, and a charity as 25% beneficiary, can my wife still roll over her interest into her own IRA after I am gone?
    1. Yes
    2. No, because the charity disqualifies the other beneficiaries from electing a rollover or an Inherited IRA.
  6. If I name my revocable trust as the primary beneficiary, am I required to take out my minimum distributions based on my single life expectancy?
    1. YES
    2. NO
    3. MAYBE
  7. If I name my trust as my primary beneficiary and my spouse is the primary beneficiary of my trust, will my spouse be allowed to roll over the proceeds into his or her IRA? [consistency]
    1. YES
    2. NO
  8. If I name a child as the primary beneficiary of the IRA, what options does he or she have with respect to minimum distributions after I die?
    1. within 1 year?
    2. within 5 years?
    3. over his/her lifetime?
    4. A, B or C
  9. I just turned age 70 1/2, am married and my spouse (age 67) is my beneficiary. What is my best choice for calculating my required minimum distributions?
    1. Recalculation?
    2. Term Certain?
    3. Hybrid
    4. Depends on circumstances
    5. Doesn’t matter
  10. Once I turn age 70 1/2, must I start depleting my IRA?
    1. Yes
    2. No
    3. Maybe

How do you think you did? On the average, most people get less than half correct!  Check in tomorrow for all the right answers!

To get the right answers for you, call us and schedule a Free Second Opinion with Jim Lange! 412-521-2732.

 

Quiz from MD Producer

Blog Series: How to Take Money Out of Your IRA Tax-Free!

Posted on by in Income Tax, IRAs, Tax Law.

Did you know there are several ways to take money out of your IRA tax-free? Remember, just because you CAN, doesn’t mean you SHOULD.

The first thing you should do is consult your tax/legal/financial advisor(s) and determine if taking money out of your IRA is the right step for you!

Option 7: Oil and gas investments.

Many people forget that some investments in an oil and gas investment generate an ordinary loss, which also can be utilized to offset distributions from an IRA.

Everyone’s situation is different! Make sure to consult your trusted advisors to determine what is appropriate for you!

 

Information gathered from MD Producer article for professionals

Blog Series: How to Take Money Out of Your IRA Tax-Free!

Posted on by in Income Tax, IRAs, Tax Law.

Did you know there are several ways to take money out of your IRA tax-free? Remember, just because you CAN, doesn’t mean you SHOULD.

The first thing you should do is consult your tax/legal/financial advisor(s) and determine if taking money out of your IRA is the right step for you!

Option 6: Income tax credits.

There are some investments that might generate a tax credit. If you give $3,000 away to a charity, this is a deduction and would save some taxpayers about $1,000 in taxes. On the other hand, the tax credit reduces your taxes dollar for dollar.

In the event that you can make $3,000 in tax credits, you would reduce your income taxes by $3,000. Therefore, tax credits are usually much more valuable than a tax deduction. Many investments can generate a tax credit. Have your advisor review the alternatives, as well as make sure that the overall investment return from the tax credit generator is a good one. Don’t just invest based on tax credit benefits. It is important that you always review the overall investment return with your advisor carefully.

Everyone’s situation is different! Make sure to consult your trusted advisors to determine what is appropriate for you!

 

Information gathered from MD Producer article for professionals

Blog Series: How to Take Money Out of Your IRA Tax-Free!

Posted on by in Income Tax, IRAs, Tax Law.

Did you know there are several ways to take money out of your IRA tax-free? Remember, just because you CAN, doesn’t mean you SHOULD.

The first thing you should do is consult your tax/legal/financial advisor(s) and determine if taking money out of your IRA is the right step for you!

Option 5: Losses relating to the sale of rental properties.

Many people forget that the loss on a rental property usually will generate an ordinary loss and not a capital loss. A net capital loss, as described above, is usually limited to only $3,000. An ordinary loss, on the other hand, may have no limitations (depending on your tax situation).

This particular opportunity has a lot of complications, exceptions, and holes to jump through, so have your trusted advisor review your situation carefully!

Remember, these are just ideas!  Everyone’s situation is different. Make sure to consult your trusted advisors to determine what is appropriate for you!

 

Information gathered from MD Producer article for professionals

Blog Series: How to Take Money Out of Your IRA Tax-Free!

Posted on by in Income Tax, IRAs, Tax Law.

Did you know there are several ways to take money out of your IRA tax-free? Remember, just because you CAN, doesn’t mean you SHOULD.

The first thing you should do is consult your tax/legal/financial advisor(s) and determine if taking money out of your IRA is the right step for you!

Option 4: Net operating losses.

If you have deductions or losses in a prior year that generated a negative taxable income, you may be able to carry that forward! Many of these deductions from the prior year are able to be carry forwarded into the next year and can be taken against the IRA distribution.

Everyone’s situation is different! Make sure to consult your trusted advisors to determine what is appropriate for your situation!

 

Information gathered from MD Producer article for professionals

Blog Series: How to Take Money Out of Your IRA Tax-Free!

Posted on by in Income Tax, IRAs, Tax Law.

Did you know there are several ways to take money out of your IRA tax-free? Remember, just because you CAN, doesn’t mean you SHOULD.

The first thing you should do is consult your tax/legal/financial advisor(s) and determine if taking money out of your IRA is the right step for you!

Option 3: Charitable contributions.

If you are very charity-minded, it may be best make an additional contribution to a non-profit organization, which is usually tax-deductible, or even ask your lawyer about establishing a charitable remainder trust. These charitable contributions can sometimes be used to offset an IRA distribution. Please understand that your itemized deductions are reduced depending on your adjusted gross income, so you should definitly consult a tax advisor before moving forward with any tax reduction strategy!

Everyone’s situation is different!  Make sure to consult your trusted advisors to determine what is appropriate for your situation!

 

Information gathered from MD Producer article for professionals

Blog Series: Take Money Out of Your IRA Tax-Free!

Posted on by in Income Tax, IRAs, Tax Law.

Did you know there are several ways to take money out of your IRA tax-free? Remember, just because you CAN, doesn’t mean you SHOULD.

The first thing you should do is consult your tax/legal/financial advisor(s) and determine if taking money out of your IRA is the right step for you!

Option 2: Capital losses.

Many investors have unrealized capital losses. Ask your advisor to determine the basis of each of your  investments and find out whether or not they have any unrealized capital losses. Please remember that only $3,000 of net capital losses can be usually taken on an income tax return. However, the additional capital losses can sometimes be carried forward to future years. This $3,000 loss can offset a $3,000 distribution from an IRA, making the distribution from the IRA income tax-free!

Everyone’s situation is different!  Make sure to consult your trusted advisors to determine what is appropriate for your situation!

 

Information gathered from MD Producer article for professionals

Blog Series: How to Take Money Out of Your IRA Tax-Free!

Posted on by in Tax Law.

Did you know there are several ways to take money out of your IRA tax-free? Unfortunately, many investors are not aware of these options. Obviously, just because you CAN doesn’t mean you SHOULD.

The first thing you should do is consult your tax/legal/financial advisor(s) and determine if taking money out of your IRA is the right step for you! There is often a penalty for taking out the funds earlier than 59 1/2 and unless you meet certain criteria this penalty cannot be avoided.  Even if you CAN avoid a penalty, it is prudent to go over your situation with an adivsor and determine if there are other options that might work better for you.

Over the next 7 days this blog will explore some of the possibilities of taking cash out of your IRA tax-free!

Option number 1: Roth IRA Conversions

Even if you don’t need money now, you may want to consider converting some or all of your IRAs to Roth IRAs.  When you do this, it isn’t tax free!!!  You will typically pay the taxes in the year the conversion is made.  However, since Roth IRA’s grow tax free and you’ve already paid income tax on the amount you contributed/converted, if you need to take a withdrawal in the future, the money you withdrawal is income tax-free!

Everyone’s situation is different so be sure to ask your advisor to do a Roth IRA conversion analysis to find out if this option makes sense in your situation as well as when and how much you should be converting!

 

Information gathered from MD Producer article for professionals

 

Here Is A Social Security Claiming Strategy You May Not know!

Posted on by in Tax Law.

What strategies can you use to increase you and your spouse’s joint lifetime Social Security benefits?

The file & suspend strategy puts a married couple in the position of receiving maximum Social Security benefits at age 70, with one spouse able to claim some of the benefits at their full retirement age.

As an example, if your full retirement age for a couple 66 and one spouse, let’s say the husband in this instance, claims Social Security at age 66 but then elects to suspend his benefit entirely, the wife can claim a monthly spousal benefit (roughly 50% of her husbands benefit) when she reaches 66.

This is accomplished by filing a restricted claim for a spousal benefit only at that time.  So while some spousal benefits are coming in, the couple has elected to put off receiving their own Social Security benefit until age 70.  This will allow them to collect the delayed retirement credits of 8% annually between ages 66 and 70.  At age 70 each spouse will be entitled to collect their own enhanced benefits.

Social Security planning pays off!

IRA Update

Posted on by in Tax Law.

With all the concern over the impending fiscal cliff, not much attention has been given to the new IRA contribution limits for 2013.  Due to the cost of living adjustment, the maximum total contribution for IRAs has increased from $5,000 to $5,500 for those younger than 50 years old in 2013.  The total catch-up contribution amount has also been increased from $6,000 to $6,500 for individuals older than age 50.

There is still no income limit on traditional IRA contributions. However, there are income limits for those who seek tax deductions for those contributions. If you are a married couple and you are both covered by employer plans, you can get a tax deduction for your traditional IRA contribution if your modified adjusted gross income is less than $95,000. The available tax deduction phases out at $115,000.  If your modified adjusted gross income is between $95,000 and $115,000, a partial tax deduction is available.

Roth IRA contributions, however, do face income limits. Single taxpayers with incomes less than $112,000 (and married taxpayers making below $178,000) can make a full contribution to their Roth IRAs.  However, if your earnings are above $127,000 (or $188,000 for married couples), a Roth IRA contribution is not available to you.  Individuals and couples whose modified adjusted income falls between these amounts could be eligible for partial Roth contributions.  As always there are no tax deductions available for Roth IRA contributions, as gains grow tax free.