Q&A From Our Life Transitions e-Mailbag

We regularly get questions from people trying to manage financial transitions in their lives.  I thought I would share some of these real-life scenarios as a collaborative learning tool.  After all, life is complicated – so let’s figure it out together.

Question:  My sister, who was 75, just passed away after a brief illness and named me and my other sister as 50{f134198d9113e2950c528451c6a82e811c00be694aa43f3b108e6b0831f6584b} beneficiaries on her $450,000 IRA.  Can I take my portion and use it to finish paying off my house?

Answer:  Every dollar withdrawn from an IRA is taxable, so if you withdraw the entire amount, you’ll give Uncle Sam about one-third of your inheritance.  Since you are a named beneficiary, you can “stretch” your withdrawals over your lifetime, greatly reducing the tax bill.  Or if you really want to pay off your house, you could consider a 5 year payout and stretch the tax bill over that period.

Question:  I am 65 years old, married and want to retire next year.  I’m trying to decide if I should take my Social Security next year or wait until I’m 70 and live on my investments until then.  How do I decide?

Answer: The time between retirement and age 70 is the sweet spot for retirement tax planning.  One strategy is to delay SS until age 70 (thus growing 8{f134198d9113e2950c528451c6a82e811c00be694aa43f3b108e6b0831f6584b}/year) and live on your 401k dollars. This assumes you’ll be in a lower tax bracket before age 70.  Because there are several factors to weigh, this is a part of retirement planning that needs professional guidance.

Question:  My husband has always been the financial person in our house.  He has recently been diagnosed with a form of dementia, and I don’t know what to do next.

Answer:  The first step is to get your finances organized using an online tool like Everplans or a hard copy binder. You’ll know what assets and insurance you have, and can make a plan to pay for his care. You’ll also need a financial power of attorney that allows you to manage his financial affairs. And just as importantly, make sure you have a plan for yourself in case your assets are drained paying for his care.

If you’d like to learn more about the real-life topics addressed here today, call our office for a complimentary meeting.  Have a question you’d like answered?  Email your question to erin@marshpros.com and you might see it in this column next month.