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Charity can count toward clients' IRA withdrawals: Retirement Scan

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Our daily roundup of retirement news your clients may be thinking about.

Charity can count toward your IRA withdrawal
From a tax perspective, donating required minimum distributions from a traditional IRA to a qualified charity is a smart move for retirees, according to this article on The Wall Street Journal. Although retirees cannot claim a tax deduction on the charitable donation, the RMD amount is excluded from computing their adjusted gross income. A lower AGI would enable them to reduce or avoid 3.8% surtax on net investment income, Medicare premium payments and taxes on Social Security benefits.
Ask Larry: Should my wife file just for spousal benefits?
A 66-year-old wife can file a restricted application for just her Social Security spousal benefit on her husband's record, according to this article on Forbes. She may start collecting the benefit with the month she reached her full retirement age. The spousal benefit will be 50% of her husband's full retirement age benefit amount even if he filed for his own retirement benefit before he reached his FRA.

Why your credit score matters in retirement
Clients are advised to maintain a strong FICO credit score even after they retire, according to this article on Kiplinger. This is because they may still need to apply for an auto lean, a home mortgage or a credit card in retirement, and lenders have to check their credit score before they approve their application. Retirees who have a credit score of 740 or higher can easily get approval on their loan applications, while those with lower scores could end up with higher interest rates on approved loans.

4 facts about annuities every baby boomer should know
While IRA and 401(k) contributions are capped, clients can invest as much money as they want in an annuity, according to this article on Motley Fool. However, annuity holders are not allowed to withdraw the funds before they turn 59 1/2 or they face a 10% penalty. Clients may face hefty fees and commissions when buying an annuity, but their investment in the product is safe if they buy it from a carrier that earned favorable reviews from rating companies, such as A.M. Best and Standard & Poor's.

Don’t work? There’s still a way to save in a Roth IRA
A couple is allowed to contribute to a Roth IRA even if one of the spouses is not working and has been collecting Social Security benefits, provided the couple files a joint tax return, according to this article on Cincinnati Enquirer. The account is called a "spousal" Roth IRA to indicate that the earning spouse is the one funding the account. Unlike in a traditional IRA, contributions to a Roth IRA are after-tax, which means that investors don't get an upfront tax deduction but can make tax-free withdrawals anytime. A Roth IRA is also not subject to required minimum distributions.

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