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The Free Financial Advisor

You are here: Home / Archives for Life expectancy

How Long Are You Going To Live?

May 28, 2018 by Jackie Cohen Leave a Comment

How long are you going to live? Figuring out your life expectancy is arguably the first step in creating a successful retirement plan–and also arguably the toughest number to figure out. [Read more…]

Filed Under: Personal Finance Tagged With: Life expectancy, Retirement

Unplug Grandma’s Life Support…Quick! Inherited IRA rules changing?

February 29, 2012 by The Other Guy 21 Comments

Why You Might Have the Awful Hope That Grandma Dies This Year.

According to this Wall Street Journal article, Congress is toying with the idea of getting rid of (or at least seriously modifying) Inherited IRAs.

Here’s why you should care: getting an inherited IRA is like winning the lifetime income lottery.

What is an Inherited IRA?

 

An inherited IRA is just what it sounds like – it’s an IRA that you didn’t start, i.e., you inherited it.  In most cases, when someone passes away, they’ll leave retirement accounts to their spouse, but sometimes those spouses are pre-deceased. In this case IRA assets fall down to the next (or sometimes the third) generation.

When you inherit a spouse’s IRA, the IRS allows you to convert it to your own, delaying any and all taxes until at least age 70 ½ (assuming you don’t remove the money to spend).  If your spouse is substantially younger than you, couples are allowed to treat it as an inherited IRA for tax purposes.

What are the Current Benefits of an Inherited IRA?

 

The major benefit is the ability for non-spouse beneficiaries to distribute those taxable dollars over the lifetime of the beneficiary.

Grandma is 68 and goes to what crazy uncle Jim called “that big tax shelter in the sky,” but leaves her $500,000 IRA to her 4 year old grandson.  Because the distribution is based on his life expectancy…around 80 years or so… if structured correctly it would provide him income for the rest of his life.

Apparently, the IRS and Congress think it’s too long to wait another 80 years or so to wring all the tax money from Granny’s IRA, so thye’re thinking about changing the law to require distributions from an  inherited IRA within 5 years of the original  account holder’s death.

Yikes.

That’s a change.

Thankfully, this isn’t anywhere near the President’s desk yet, but I wanted to put it on your radar screen…in case…you know…someone has a little “slip and fall.”

Don’t quote me later.

– TheOtherGuy

 

 

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Filed Under: Estate Planning, investing news Tagged With: Congress, Granny, Individual Retirement Account, inherited IRA, Internal Revenue Service, Life expectancy, rules changing, Tax

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