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OT: The rapidly approaching ugly side of IRAs and like Posted by MI-Roger [Email]  (#882) [Profile/Gallery]
(more from MI-Roger) on Wed, 23 Jul 2014 18:16:20
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We had our 3 month check-up with our Financial Planner tonight and I had a question that has buzzed in the back of my head for a while. Namely, "When is the right time to start taking distributions from our IRAs, 401(k)s, 403(b), etc. I will hit the 59-1/2 age next December and am currently planning to work until 68.
When I asked my question our Planner got excited, started drawing on the white board, discussing de-qualification of savings and Legacy Planning, Survivor Insurance, etc. I obviously hit the mother lode of interesting questions. Apparently there is no clear cut answer (which I expected) or even commonly used automated planning tools to assist with deciding whether to start early, wait until late, start withdrawing as soon as you retire, etc.
What I discovered later in a quick internet search of Required Minimum Distribution calculations was eye opening! RMDs become mandatory at age 70-1/2 regardless of when you start taking distributions, and are based on a life expectancy of 112 to 115 years. Plugging in our ages and savings show that our RMD amount may be in excess of $300K annually in our mid-90s. This will result in a HUGE annual tax bite for us, and since the accounts are still 20 years from depletion there will be an EVEN BIGGER tax bite for our kids upon our deaths! Assuming a mid-90s life expectancy.
We still have 18 months to decide with assistance of our Planner what to do before I am even eligible to make withdrawals (unless I elect to use the 72(t) rule before then), but right now it appears the best scenario may be to move as much money as possible from Tax Deferred to Taxable status (de-qualifying the funds) prior to the 70-1/2 age point. My plan to work for 10 more years may be changed to only 2 more years to avoid excess future taxes.
With the demise of defined benefit pensions this ugly scenario will impact all of us. Plan early and be prepared.
_______________________________________ Saabs owned: 2008 9-5 Aero Sedan, sold at 227K miles 2006 9-3SC 2.0T - Wife's daily driver 2000 Viggen Convertible - Sold May, 2022 1964 Quantum IV Formula Car - Retirement project 2000 9-5lpt Sedan, sold at 318K miles
, Wed, 23 Jul 2014 18:16:20 <-- Viewing This Message, Fri, 25 Jul 2014 17:08:12, Thu, 24 Jul 2014 05:27:14
, Thu, 24 Jul 2014 15:14:02, Fri, 25 Jul 2014 17:00:21, Thu, 24 Jul 2014 03:29:08
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