How to mitigate the taxes that come with a Roth IRA conversion: Retirement Scan
Our daily roundup of retirement news your clients may be thinking about.
How to mitigate the taxes that come with a Roth IRA conversion?
IRA investors should consider implementing a charitable lead annuity trust when converting some of their funds into Roth to mitigate the tax bite, according to this article on MarketWatch. That's because setting up a CLAT results in a one-time upfront Schedule A charitable deduction, which can offset any increase in taxable income as an outcome of the Roth conversion.
Retirement roulette? Letting it all ride on stocks may not be best
Investors who are approaching retirement should not rely too much on the bull market and they should not retain a substantial allocation in stocks, according to this article on Kiplinger. That is because the market is ripe for correction that would lead to a downturn, and investors will not have the time to recoup from their market losses. To protect themselves from a market decline and continue to benefit from the current market conditions, investors may want to invest in dividend-paying stocks, annuities, and municipal bonds as a way of creating guaranteed income streams.
How to plan for retirement as a small-business owner
Small-business owners who are planning for the golden years are advised to create a retirement budget that accounts for the benefits that they will lose after retiring, according to this article on Motley Fool. For example, they may no longer qualify for a home-office deduction after they retire, as they will cease from using a portion of their house for their business operation. They should choose a retirement savings plan, such as a solo 401(k), which offers upfront tax deduction, and a Roth 401(k), which provides aftertax income in retirement.
How to best leave an IRA to charity
Naming a number of charities as beneficiaries of an IRA may not be a good idea, as the IRA provider might require a lot of paperwork that could be too much for these charities when they claim the bequest, according to this article on Morningstar. A better option for IRA investors is to name a donor-advised fund as a beneficiary and provide the fund with the list of charities that are supposed to collect the assets after they die. Another tax-efficient option is to transfer IRA assets through a personal trust, but this strategy could also mean a lot of paperwork for charities.
Ask Larry: Should I file and suspend?
A 65-year-old client should not file for and suspend his Social Security retirement benefit when he reaches 66 to allow his wife to collect a spousal benefit, according to this article on Forbes. That's because under the new law the wife who is the higher earner will be deemed to have filed for her own retirement benefit, and this will result in zero excess benefit. Moreover, she may also not be allowed to collect her benefits before reaching her full retirement age because of the earnings test.