Ways to Optimize Your Retirement Plans
TransGlobal Holding Co.
30+ years of wealth management expertise with 30+ branches across 14 states.
What Happens When There is Excess Money in Your Retirement Accounts?
1. Required Minimum Distributions (RMDs)
Typically, engineers or designers, along with their spouses, accumulate retirement accounts ranging from two to seven million by the time they retire, and they tend to keep the money without using it. When they reach their seventies, the IRS mandates a minimum annual withdrawal known as Required Minimum Distributions (RMDs). Since the money in these accounts has never been taxed, the IRS requires you to withdraw a certain amount to impose taxes. Most people, having other sources of income, initially prefer to withdraw only the minimum required amount, which is usually less than 4% in the first year. For example, with three million, the annual withdrawal might be around eleven to twelve thousand, which is manageable. However, as age increases and returns remain favorable, a problem arises. By the time RMDs reach 90, the required withdrawal increases to 9%. If the account holds five or even ten million, one must withdraw forty-five or ninety thousand annually, resulting in substantial taxes. This is in addition to other sources of income like rental income, investment returns, social security, etc.
2. Income and Inheritance After Passing Away
After a person passes away, income tax must be filed, typically through either a lump-sum payment or distributed over ten years to the children. If children choose the ten-year distribution, it often coincides with a period of higher income for them. Providing a significant sum of income annually may increase their tax liability. Importantly, even after paying taxes, if there are future inheritance tax concerns, the remaining money is subject to further evaluation.
In short, whether a person is alive or has passed away, tax issues are inevitable.
Retirement Plan Arrangements at Different Life Stages
??Early Years: Changing Jobs
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? Middle Years: Possessing a Certain Amount of Assets
? Later Years: RMDs Issues
How should you arrange your retirement plans at different stages of life? If you are looking for an answer to this question, or any related matters, feel free to contact us at TransGlobal. We have experts ready to assist you.
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Please contact the local agent of TransGlobal today or call 888-831-8868.?
Disclaimer: This article is for informational purposes only and should not be construed as financial advice or legal advice. Please consult with a professional to develop a strategy that is right for you. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. TransGlobal Advisory, LLC (TGA) does not provide legal, tax, or accounting advice. You should consult your personal tax or legal advisor before making any financial decisions.