Podcast Episode 378: What Should You Do with an Inherited IRA?
The one constant in financial planning is change, especially when it comes to tax laws. The government is always adjusting tax laws and they’ve recently made some changes to the rules around retirement accounts. For people who have been saving for retirement, it’s important to know how these changes will affect you and your family.
In this episode of the Money Wisdom podcast, Jake Doser, CFP®, CPWA® and Nicholas J. Colantuono, CFP® tackle the intricate subject of inherited IRAs and the ever-evolving tax laws that accompany them. As tax regulations change, it’s crucial to stay informed and prepared to handle the financial implications that arise when inheriting retirement accounts.
The biggest change we’ve seen in recent years is the outdated concept of the stretch IRA, where beneficiaries could withdraw funds based on their life expectancy. Beneficiaries are now required to withdraw the entire amount within ten years, significantly impacting tax planning strategies. This shift emphasizes the importance of understanding the tax implications and devising a plan to minimize the burden.
At the core of the issue are taxes. The government’s requirement for minimum distributions from inherited IRAs is not about ensuring income but about securing tax revenue. That’s why these changes are happening and it highlights the need for proactive planning to mitigate the generational tax burden. As Nick aptly puts it, “Nobody should leave Uncle Sam a tip.”
That’s why we often have conversations about Roth conversions as a strategic move to manage taxes efficiently. By converting traditional IRAs to Roth IRAs during low-income years, individuals can pay taxes at a lower rate and ensure that their money grows tax-free in the future. This approach not only benefits the account holder but also provides a tax-efficient legacy for beneficiaries, which has become much more important with these tax changes.
All of this ties back into a cohesive financial plan that integrates tax planning, investment strategies, and estate considerations. Don’t treat retirement planning as an isolated task. Instead, take a comprehensive approach with a financial advisor.
Text the word OFFER to 807-570-0436 to get a copy of ‘Are You Paying Too Much in Taxes in Retirement?’ and start identifying solutions to the tax challenge in retirement.
Here’s some of what we discuss in this episode:
• The changes made to the stretch IRA will force you to pay taxes on that money much sooner.
• Why does Uncle Sam require a minimum distribution on inherited IRAs?
• How this changes the legacy planning portion of our conversation with clients?
Information presented in our podcasts is considered current as of the created date. Over time, some information presented may become stale. We recommend you consult with your Financial Professional before making any changes based on information contained here.
Johnson Brunetti is a marketing name for the businesses of JB Capital and JN Financial.
Investment Advisory Services offered through JB Capital, LLC. Insurance Products offered through JN Financial, LLC.
The guarantees provided by any type of insurance contract are based on the claims-paying ability of the insurance company.
Related Resources
-
Avoiding the Retirement Tax Trap
Once you retire, understanding your tax implications becomes even more crucial. After all, taxes don’t disappear in retirement. In fact, as you begin withdrawing from your retirement savings, you … -
Podcast Episode 405: The Retirement Tax Trap
Prefer to watch? Click here to watch and listen on YouTube. The term “tax trap” comes from the misconception that you’ll need less income in retirement, so you’ll pay lower taxes. This leads ma… -
What Should I Watch Out for When Reviewing My Retirement Tax Return?
Now that tax season is over and your return is filed, you may be wondering what you need to review in preparation for next year, especially if you’re approaching retirement. In this week’s Mone… -
Retiring In Uncertain Times
During times of economic uncertainty, it’s natural to feel overwhelmed. It seems like every day there’s a new update from the markets. But rather than reacting to the noise, focus on why you have … -
How Do Tariffs Affect the Stock Market?
If you’ve been tuned into the news lately, you’ve probably heard a lot about tariffs. The current administration’s latest economic push has introduced a wave of uncertainty in the market. But what… -
How Do I Get Out of Debt Fast?
Most people with debt want to get out of it quickly and efficiently. To do that, you first need a clear understanding of your financial situation. Second, you need a clear, actionable plan. In … -
Why Do I Need to Account for Inflation in Retirement?
Today’s question is: What is inflation and why is it important to account for in my retirement plan? Inflation is the rising cost of goods over time. Meaning, it will cost you more money next year… -
How Does a Tax Return Work?
As tax season concludes, it’s a good time to refresh your tax knowledge. In this week’s Money Wisdom Question Series, Ian Fergusson, RICP® discusses how filing your taxes works and why it’s essen… -
What Is a Fiduciary?
When it comes to managing your money, trust is everything. That’s why today’s question is one of the most common and important ones we receive: What is a fiduciary? In this week’s Money Wisdom … -
Podcast Episode 403: How to Approach Finances in a Second Marriage Later in Life
Getting engaged later in life is an exciting time, but it requires different financial planning conversations. With blended families, different retirement timelines, and evolving goals, couples in…
