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Roth Conversions & The Widows Penalty – Finger Financial Five #128

Jeremy Finger
Jeremy Finger
Table of Contents

“I believe we should all pay our taxes with a smile. I tried, but they insisted on cash.” 😊 – Unknown

Married couples have a larger standard deduction than single people. $27,700 versus $13,850. If you are over 65, you can add $1500 if you are married and $1,850 if you are single. 

We talked in detail about the Widows Penalty on FFF #112.

What is important to address is the benefits of Roth Conversions for Married couples. Why?

Because you can use a more favorable tax bracket when you can file taxes Married Filing Jointly.

Usually, one spouse is the beneficiary of the other and vice versa. So, if one spouse dies, Required Minimum Distributions must be taken from the entire IRA account balances when the survivor reaches 73 years old.   

For example, suppose Spouse A has tax-deferred account balances of $1 million, and Spouse B has $3 million. And suppose the required minimum distribution (RMD) is 5% this year. That would result in $200,000 combined RMDs ($4 million x 5% = $200,000). $200,000 ordinary income is a 24% bracket for 2023 and a 32% bracket for singles. 

This does not include potentially the increased taxes on Social Security, Medicare, Capital Gains, Net Investment Income tax, or complication with Alternative Minimum Tax.

Let me know if you have any questions. You can email me at [email protected] or click here to schedule a phone appointment. 

We are having a seminar on Taxes in Retirement at the Dunes Golf and Beach Club Tuesday 18th at 2p. If you want to attend, click this link and hit confirm on the calendar. 

We are also having a market update webinar on April 25th at 9a. Click this link to register. 

On the lighter side, we enjoyed our trip to Los Angeles last week. Elliott continues to destroy me in chess. My goal now is to tie him. That is my new victory. 

Shout out to Paul Saunders in our office. We had some leftover food from a seminar. He packed it in little boxes. I did not know why. He said he delivered it to the homeless in the Myrtle Beach area. A good deed, Paul! 

Hope all is well with you and your family,

Jeremy

Finger Financial Five – 5 points in 5 minutes or less – is to provide you with a weekly shot of useful financial information.  My intention is to share principles, so that you will have more clarity and peace, that help you make better financial decisions. 

Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor.  Stratos Wealth Advisors, LLC and Riverbend Wealth Management are separate entities. 

This content is developed from sources believed to be providing accurate information and provided by Riverbend Wealth Management. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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