Just now reading this (many, many page) thread. It’s insightful to see the range of situations and responses. We have been fortunate that both of our residences (two sides of the country) during marriage have been in low COL areas. We drove cars into the ground, had little interest in expensive “things”, and did most house/yard stuff ourselves. I had a good-paying job for 15 years until I “retired” with kids, and my husband had a good job before he retired a bit early 4 years ago. We have had high medical expenses, even after insurance, and I have a high-cost insurance.
Now, we have significant retirement income, enough that we don’t have to watch every penny (although I do). Our big expense is travel - we both love traveling. And we still make every effort to bring the sons. We’ve always loved sharing new places with them and managed to raise them to like everything from museums to hiking to musicals. We’ll keep bringing them as long as possible, in part because my husband is a bit limited due to back issues, and if I want to do more active things like extensive walking or ziplining (which he can’t), I like the company. I’m taking S19 on a ski trip over his spring break because DH can no longer ski.
@BunsenBurner I’m with you - we plan to leave little to the kiddos, our legacy to them is a good education and the memories of family time.
Thanks to you all. I didn’t know about the increase in the age for RMD. This means DH can go two more years before taking his. He’ll get his full SS at age 70, in January 2021, and then be able to delay his RMD until 2023. That’s good news for us – it will allow his IRA balance to grow two more years without being touched, and will give us the bump up in income in 2021 from SS and then again in 2023 from the RMD. This is good news for us.
When my parents died in 1988 the “stretch” was only five years for inherited retirement accounts. We let the balance continue to grow and took it all in one year as late as we could. We were relatively young when my parents died (they, too, were relatively young when they died), so I was around 30 when I took it. In a typical scenario, adult children would likely be much closer to their peak earning years. This seems particularly likely for the demographic on CC as I get the sense that many here (ourselves included) were older when they had their children.
My dad turned 86 last year and didn’t mow his own lawn for the first time. So I figure I have another 30+ years to go. We had a neighbor growing up who was 10 years older than my dad who cut his own grass and my dad would always say he had 10 years after that neighbor stopped to keep cutting his own. Something I enjoy doing and expect to keep doing it as long as I can. My dad still clears his own snow. Pushes it more than shoveling and they get very little snow per season. We have tried to get a plow service but he keeps turning them away. At some point no doubt I move to a smaller house with a smaller yard and less trees. May well be further south though with climate change who knows how much snow we would get where we are now. Life is what happens while you are making plans so no doubt I may need to pay for that work to be done at some point.
I am impressed with the loooong range planning. This will be 30-40 years down the road, I would guess. Do we know “need based” scholarship will remain a thing?
@lxnayBob What are the benefits of a trust? When my kid was younger, it seems right choice. Not sure if we need to maintain it now that the “kid” is all grown up and passing the age of distribution schedule marked in the trust. It looks like one c Ould just do TODs instead since we have an only child.
Its difficult to know for sure whether trusts make sense in any given situation without knowing a lot of facts, circumstances, goals, etc. If you trust you financial planner and estate attorney (presumably you do otherwise you would go elsewhere), I would go with what they say. Not to say they cannot make mistakes, be wrong, etc. But without something further, I would go with the people who do this for a living.
All IRA distributions get reported on line 4 of your 1040, both the full amount and the taxable amount (which is zero for a Roth). On the FAFSA, untaxed distributions are reported as untaxed income on line 92e.
I wasn’t suggesting that this is something to plan around, just pointing out that for those few where the timing falls at exactly the wrong time, the 10 year limit could seriously impact FA. It’s an unintended side effect of the SECURE Act.
I don’t know that much about trusts, but wouldn’t a trust for a traditional IRA be a terrible idea now? Trust tax rates hit 37% at $12,000 in income or so, if the trust has to drain the entire IRA in only 10 years the tax hit would be huge.
One of our kids is a bit gullible and a spendthrift. I’m sure he’ll grow out of it, but I don’t want to give him $30k/year cash now when someone could convince him to invest in a tattoo parlor. Btw, we gift it to him in a Crummey Trust ? where he has 30 days to withdraw it, but then it’s irrevocable.
Even the mature one could benefit from timing his income. For example, let’s say we die tomorrow. His inheritance would be more useful to fund an early retirement, or a house purchase, than to receive it this month (when his combined Fed and state and city marginal tax brackets are astronomical).
Additionally, using rollover trusts allows my wife and I to maintain the portability of our lifetime exclusion even though our assets are not equal.
I can’t say that I’m an expert, but it appears beneficial for us.
Inheriting a Roth can really reduce the need for need-based aid in a number of ways. Better to have the freedoms to pay for college or not than to have to depend on aid.
From what I remember, it is NOT a good idea to keep IRAs in a trust. Some of the benefits of IRA gets lost in a trust although I can’t remember what.
That was what my kid had when young. It was good as long as the corporate trustee worked with us. When they assigned a new guy, it was time to end. Fortunately, my kid was a few months away from becoming 18. The new guy sold Vanguard PrimeCAP, that was doing very well, from my kid’s account to buy some weird fund without consulting me. He didn’t stop there. He kept selling even after I told him not to. We started the process to close the trust and as soon as my kid turned 18, we turned the fund over to her. So far, absolutely no problem. She manages to save from her meager NSF grad fellowship. Irrevocable trusts are a headache.
As long as colleges try to optimize revenue or implement other policies through price discrimination, need based scholarships will be among the tools that many of them use.
Best not to leave IRA in a trust as the surviving trustee must liquidate the trust and disperse. An individual has flexibility to take distributions over time… best for tax management.
I suppose there could be some scenarios where leaving to a trust could be a viable option but I would think that exception would relate to the deceased persons desire to strictly control the money i.e possibly disabled person or substance abuser to inherit. For most folks/cases best to specify individual as beneficiary of IRA