Evans Wealth Management Blog

Articles written by Evans Wealth Management are designed to educate clients & potential clients on concepts important to their financial future.

4 things to think about involving Spouses and IRAs

When a spouse passes and you are named the beneficiary of an IRA, you have a number of options. However there are some specifics to consider related to choosing a spousal rollover.

 

  • If the deceased was 70 years & 6 months or older, they were required to take a Required Minimum Distribution (RMD). Assuming you are younger, selecting the spousal rollover option could delay or stop RMDs on the account. What this does for you is allow your account to continue to grow tax deferred until you reach the target age. Increasing its worth.

  • If you are younger than 59 years & 6 months, taking distributions from a spousal rollover would subject you to taxes and a 10% early distribution penalty. Needless to say, if you are young and need the money, establishing an inherited IRA payable to you rather than your spouse is likely a better option.

  • When you inherit a Roth IRA, choosing a spousal rollover will not trigger RMDs. However, an inherited Roth IRA that is already payable to the spouse will require RMDs.

  • If you were to determine you don’t need some or all of the money in the first to die spouse’s IRA, you could disclaim a portion or all of it. When a spouse disclaims the IRA, the funds are directed to the deceased spouse’s contingent beneficiaries (usually children or grandchildren). What this decision does is it stretches the IRA by resetting the distributions based on the beneficiaries’ life expectancy which should be much longer than yours. More tax-deferred growth means larger IRA balances. This can be an especially wise decision if there are concerns your estate will be subject to estate taxes. This decision requires thought because once done it cannot be undone. The decision must be made within 9 months of your spouse’s death and before you take possession of the assets.

These are just three general rules to consider related to inherited IRAs. The issues surrounding inherited IRAs are complex and should be made after careful deliberation and ideally with the help of your tax or financial advisor.

 
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Balancing Children's College Tuition & Retiremen

Balancing Children's College Tuition & Retirement

Many parents struggle when it comes to deciding how to lay aside funds for both college and retirement.

Retirement or College fund, where should money go?

 

Some questions to consider:

  • How long until you retire?
  • How financially prepared are you for retirement?
  • How long until your children attend college?
  • What is the projected total cost for college?

 

    Points to consider:
  • Parents should review their current budget. Are there adjustments that need to be made to free up funds for college savings?
  • Few pay the full college list price. Most receive some form of scholarship. A 2015 study suggests 90% receive some form of financial aid reducing the cost on average 54%*
  • The costs of a 4 year degree vary widely depending on the school your children plan to attend. Take a look at in-state, out-of-state, public and private options. Then set expectations with your student, based on your budget, well in advance of the time when he or she begins applying for acceptance.
  • Parents don’t have to fund the full cost. Establish a percentage of the cost that you are comfortable with and stick to it.
  • The conversation about funding college is a great way to teach your children lessons about wise financial decision-making. When both parties are allowed to share their expectations, a path can usually be found that satisfies all parties.

 

One last thing to remember: there is no financial aid for retirement ,so it takes precedence over funding college. Short-changing your retirement could lead to many regrets down the road.

* referred source http://www.thefiscaltimes.com/2015/10/27/Never-Pay-Full-Tuition-3-Ways-Reduce-Cost-College

 
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Email: admin@evanswealthmanagement.com 6340 Sugarloaf Parkway, Suite 200
Duluth, GA  30097