Podcasts Business Retirement Starts Today Taxes in Retirement with Andy Panko, Ep # 150

Taxes in Retirement with Andy Panko, Ep # 150

Published: July 27, 2020, 8 a.m.

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Tax expert, Andy Panko, joins me today to discuss taxes in retirement. Andy and I know each other from his Taxes in Retirement Facebook group. I figured he would be the perfect person to have on the show to help me answer several questions about this topic. Retirement is one time in life when you can plan for taxes in the long-term, so you\\u2019ll want to do as much tax planning as you can. Listen to hear the different types of tax questions that people have about retirement.\\xa0

Outline of This Episode

  • [2:22] Do spouses have to calculate their RMD\\u2019s separately?
  • [8:32] An IRMAA question
  • [15:09] Bill wants to know about the 5-year rule
  • [20:36] How do RMD\\u2019s work?
  • [25:10] It\\u2019s not what you make it\\u2019s what you keep

An IRA question

Wouldn\\u2019t it be easier to combine a husband and wife\\u2019s assets and just take one RMD? If a husband and wife have separate 401K\\u2019s and IRA\\u2019s even though it would seem easier to take those RMD\\u2019s together, they must be taken individually. The RMD is based on your age and each IRA and 401K has its own calculator.\\xa0

One way to simplify the various retirement accounts is to take a rollover whenever you leave an employer-sponsored 401K. Remember the RMD penalty is steep, 50% of the required amount. So if you can find a way to simplify your retirement accounts then do it.\\xa0

An IRMAA question

The next question is actually from me. Normally I help my clients stay within the $174,000 income limit that IRMAA allows. But I recently discovered a case in which a client should go over that limit. Are there cases where people should deliberately go over the IRMAA limit?\\xa0

If you already have a large pot of tax-deferred money it makes sense to pay those taxes now rather than later. We are experiencing all-time lows in tax rates and those rates are subject to change at any point. It may make sense to pay the $70 extra per month in Medicare costs rather than be stuck with a large tax bill later. Listen in to hear what the next IRMAA income cap is.\\xa0

What are the rules of converting a Roth IRA?\\xa0

If you are already over 59.5 and the Roth account has been open more than 5 years then you are set. You can withdraw funds from that account without penalty. Any money that comes out is a qualified distribution. However, if you do not meet those requirements there could be a penalty. There are further rules and regulations surrounding Roth IRA\\u2019s and they can be very confusing. To ensure that you don\\u2019t encounter any problems with your Roth IRA, open one as soon as possible and fund it with a rollover.\\xa0

How do RMD\\u2019s work?

When you save into your IRA you are saving into a tax-deferred account. The RMD is simply there to make sure you pay the income tax on that money. It\\u2019s important to remember that the money isn\\u2019t entirely yours, you need to split it with Uncle Sam. You want to maximize the amount that you get and minimize Uncle Sam\\u2019s portion.\\xa0

You and Uncle Sam see your IRA in different ways. You see that account as an asset and Uncle Sam sees it as (untaxed) income. It won\\u2019t allow you to put it off paying those taxes indefinitely. The RMD is simply the government\\u2019s way of ensuring that you pay the taxes owed on that money.\\xa0

Press play to discover the answers to all of these listener questions and help realize all the tax planning opportunities that retirement brings.

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