By Peter Wechsler
President & Co-Founder, Franklin Retirement Solutions
[email protected]
With the summer just about behind us, it’s a good time to make sure all end of the year odds and ends are handled. Here are three of them, depending on your age:
• Required Minimum Distributions (RMDs) need to be taken from your IRAs (along with 401(k)s, 403(b)s, 457 plans and TSPs if no longer at that job) before the end of the year if you are 73 this year or older. If you have inherited IRAs, they also need to be taken before year end. As a guide on a traditional IRA, at 73 you must pull 3.77% this year for your IRA and since the percentage goes up each year, at 80 you need to pull 4.95%. Expecting to live a century? At 100 your RMD is 15.6% and at 110 is ratches up to 28.5%. Something to look forward to.
• Qualified Charitable Distributions happen once you hit 70 ½ where you can make a charitable contribution to any non-profit 501c3 using your IRA money. With the tax laws as they are now, for people taking standard deductions, you can’t write off charitable contributions but by using IRA money that has never been taxed, in effect you are using taxable money without paying any taxes. Every year the number of QCDs we do keeps climbing as folks see what a great tax-savings tool this is. Questions? Need more info? Just hit us up and we’ll fill you in.
• Roth Conversions are a way to pay taxes now on some or all of your IRAs so that going forward this money will grow tax-free not only for you (and your spouse if you have one) but the Roth money can grow another 10 years tax-free for your beneficiaries once you’ve taken the last limo ride. Tax rates are at all-time lows after the 2017 tax cuts were made “permanent” as part of the One Big Beautiful Tax Bill signed into law last year. Some say that taxes are on-sale and that while permanent, they are only permanent until a future Congress makes changes. With a $40 trillion deficit, it’s either cut spending (lots of luck with that) or raise taxes. Time will tell. Want to take a look at doing Roth conversions? Again, just hit us up.
Jeremy told us to limit our columns to 500 words, so I still have 120 to go. One thing on many folks’ minds is cuts to Social Security starting in 2032 if Congress doesn’t do anything. In case you haven’t noticed, Congress excels at this. According to a column in Monday’s Wall Street Journal, Congress may be starting to get serious about this massive problem. Don’t expect anything until after the mid-terms and the new Congress starts in January. If we are lucky, Congress will come up with a sustainable plan that will not necessitate a 22% benefit cut starting in 2032. It really needs to be next year as nothing will get done in 2028 as the presidential election looms. Last time the Social Security program was fixed was 1983 when Ronald Reagan was president.
Once last thing as many clients always kid me about my travels. I’m writing this column 33,000 feet in the air on the way to Houston for a conference along with Rob and Jeremy. Be back Friday night so we can enjoy the holiday weekend. Oops…563 words.
Enjoy Labor Day…
Peter