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Tax Planning Problem & Solution For Married Couples With $2M In IRA Accounts – Finger Financial Five #146

Jeremy
Jeremy

“Every silver lining has a touch of grey.” -Touch of Grey by the Grateful Dead

If a married couple has $2 million in pretax IRA accounts, that could be good and/or bad.

How is that bad? 

When one spouse dies, the surviving spouse could end up with $2 million in their own IRA. 

Jeremy, again, why is that bad?

If they are over 73 years old, they will need to take out 3.77% or over $75,000 from their IRA to satisfy their Required Minimum Distribution requirement. They will need to take out 3.92% in the second year, and the third year, 4.06%. The percentage goes up every year. 

This income alone pushed them into the 22% tax bracket. See below.

The surviving spouse may not need the whole $2 million. In that case, they could “disclaim” all or a portion of the deceased IRA. That portion would go to the contingent beneficiaries. The contingent beneficiaries could be in a lower tax bracket, and the surviving spouse may enjoy seeing them have a little extra spending money. 

Thinking things through from an objective, holistic point of view could make a big difference in lifetime taxes.

Read more about surviving spouse options in FFF#75

If you have any questions, please feel free to email me at [email protected] or click here for a free 15-minute phone appointment. 

Riverbend Wealth Management won Best of the Beach in Wealth Management for 2023. We are honored and humbled. Thank you. 

On the lighter side, we had a wonderful parent’s weekend at the University of South Carolina with Elliott. We had a great dinner Friday night. We went to Target and Whole Foods to get him some necessities, and neither shopping cart had a wiggly wheel.   

At his dorm, his mom noticed the old school calendar she gave him was filled with details on tests and quizzes for the whole semester. Like his mom, he is organized and neat, worries a little too much, and ends up doing fantastic. Hopefully, he can start worrying less.

I 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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