Reuters article talks additional COVID PSP...
02-08-2021, 04:58 PM
#12
Occasional box hauler
Joined APC: Jan 2018
Posts: 1,788
Look up something called the “Stretch IRA” or “Stretch 401(k)” for more information.
Here’s the Cliff’s Notes version:
Prior to last year, an inherited IRA could be passed on to an heir and the RMDs would then be based on the recipient’s life expectancy. The SECURE Act changed the time period for RMDs from life expectancy to ten years. Now the inherited IRA must be withdrawn in 10 years so Uncle Sam gets his take sooner. This means if you passed on $2M to your kid, they take out $200,000 per year which puts them in a higher tax bracket for the duration of their withdrawals rather than if they just took out maybe $40,000 per year starting in their 30’s. It effectively transfers a large portion of your kid’s inheritance to the government and they have to transfer the remainder to a taxable account after the ten years is up.
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Here’s the Cliff’s Notes version:
Prior to last year, an inherited IRA could be passed on to an heir and the RMDs would then be based on the recipient’s life expectancy. The SECURE Act changed the time period for RMDs from life expectancy to ten years. Now the inherited IRA must be withdrawn in 10 years so Uncle Sam gets his take sooner. This means if you passed on $2M to your kid, they take out $200,000 per year which puts them in a higher tax bracket for the duration of their withdrawals rather than if they just took out maybe $40,000 per year starting in their 30’s. It effectively transfers a large portion of your kid’s inheritance to the government and they have to transfer the remainder to a taxable account after the ten years is up.
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02-08-2021, 05:19 PM
#13
Gets Weekends Off
Joined APC: Dec 2012
Posts: 181
Could you clarify your point here? Clearly other countries are purchasing our debt because it’s backed by the full faith and credit of the US which is built on nothing more than reputation (reputation built over 250 years). We had private savings on the gold standard before we changed standards. What exactly is your point?
That is my point. Fiat money is built on reputation and productivity. That's why hyperinflations occur within countries that have remarkable decreases in productivity.
02-08-2021, 08:37 PM
#15
Gets Weekends Off
Joined APC: Mar 2018
Posts: 2,501
I agree the change was not positive. However, your child will still get the money tax free. They simply only get ten years of tax free growth instead of decades. So, they will likely miss out on millions in gains if you passed them a $2 million Roth IRA account, which is quite possible for someone at a mainline carrier for several decades.
02-09-2021, 05:16 AM
#16
Gets Weekends Off
Joined APC: Nov 2017
Posts: 2,113
Reuters article talks additional COVID PSP...
You are in a very small minority that actually believe in cutting Social Security or Medicare. An even smaller minority once you are actively collecting. Posturing is cool and all, but I prefer to be realistic. These programs are not going any where soon, and the sooner we accept that reality the sooner we can better tackle deficit and debt.
I don’t think I said to get rid of them. I know the political reality of that position. What I did say is that dependency creates more dependency. And that EVERYTHING should be cut 1% per year, but even that is impossible in the current political reality until something bad happens. And that the fair tax is the best tax policy, imho.
02-09-2021, 06:54 AM
#18
Gets Weekends Off
Joined APC: May 2009
Position: The GF of FUPM
Posts: 3,073
You can roll funds into a Roth and pay the tax now. If you can afford the hellacious tax bill, you can create a giant pile of money to invest tax-free.
My Roth account is up over 10 percent since Jan 1st this year and went gangbusters last. If I can manage another 12-18 years above the sod, I can put a lot of money in my pocket and none in Uncle Sam's.
My Roth account is up over 10 percent since Jan 1st this year and went gangbusters last. If I can manage another 12-18 years above the sod, I can put a lot of money in my pocket and none in Uncle Sam's.
Last edited by oldmako; 02-09-2021 at 07:34 AM.
02-09-2021, 08:00 AM
#19
Clear ECAM
Joined APC: Oct 2014
Posts: 934
Check out Backdoor and Mega-Backdoor Roth. Plenty of articles online that detail how to do it. They effectively bypass the income limit for Roth IRA contributions.
02-09-2021, 09:53 AM
#20
Gets Weekends Off
Joined APC: Mar 2015
Posts: 351
So basically you need to have a ton of disposable income or cash on hand to foot the tax bill for the rollover?
