By Yann Kostic on the August 2019 Edition
If the income from your individual retirement accounts (IRAs) turns out to be more than you actually require in retirement, and you’re looking for ways to pass on some or all of your IRA assets to your heirs, you’ll need to make some choices.
The first required minimum distribution from your traditional IRA must be taken by April 1 of the year following the year you reach age 70½, and annual distributions must continue to be made by December 31 of that year and in each following year.
The calculation to determine the required minimum distribution can be based on your single life expectancy or the joint life expectancy of you and your beneficiary (either spouse or non-spouse). So first, consider and designate a beneficiary.
The single life expectancy method generally provides for the largest distributions and highest potential taxable income. In general, it is most appropriate if you plan to withdraw most of your IRA during retirement, because it increases the potential that you will deplete the account during your lifetime.
The joint life expectancy with a spouse beneficiary method can reduce your required minimum distribution and current taxable income, and can increase the potential for tax-deferred growth. Also, when you die, your spouse generally has more options for timing distributions.
The joint life expectancy with a non-spouse beneficiary method may reduce your required minimum distributions even more than when your beneficiary is a spouse but because the beneficiary may be a child or grandchild, it may be most appropriate if you wish to maximize tax-deferred growth and leave a legacy for your heirs.
The choice you make will affect the size of the distributions, your taxable income, the amount left in the account to continue growing, tax- deferred, and the amount the IRA holder or beneficiary may leave to heirs. Your advisor can help you decide which choice is best for you.
Note: This material has been prepared for informational purposes only, and is not intended to provide financial advice for your particular situation.
Note: This material has been prepared for informational purposes only, and is not intended to provide financial advice for your particular situation.
Yann Kostic, MBA and Tom Zachystal, CFP, are Presidents of their respective As-sets Management firms, both US-Registered Investment Advisors (RIA). Tom is the San Francisco Financial Planners’ Association President. Tom and Yann cater to US expats in Mexico and worldwide. Comments, questions or to request his newsletter, “News you can use” contact him at yannk@atlantisgrp.com, in the US at (321) 574-1 529 or in Mexico, (376) 106-1613.
The full edition or view it online
