What Are RMDs?
Unlike taxable accounts, funds cannot stay in retirement accounts indefinitely. The requirement is to distribute a minimum percentage annually once you attain a certain age. The reason for these “required distributions” is to make sure that Uncle Sam gets his due. When funds are contributed to retirement accounts, it is with pre-tax dollars with the assumption that the saver is in a higher income tax bracket when contributing versus when it comes time to distribute (if the expectation is that this will not be the case, there are other options to consider so speak with your financial advisor).
I had a conversation with a recent college graduate who was preparing to buy his first car. He had an encyclopedic knowledge of every feature and option offered on each car he was considering and yet seemed unsure of the right choice. I asked what was causing his indecision and he said, “I know what I earn but I don’t know what I can spend” (did I mention he is a very smart, young man?)
A client received a letter informing him that thousands of dollars in unclaimed funds in his name had been located. The “finder” company offered to help him claim this property for a fee; 10% of the value recovered. But first, our client would need to provide a copy of his driver’s license, disclose his Social Security number, execute a notarized claim form, and entrust all of this private information to a company he had never heard of. That’s when he came to us.
The trustee has a large number of duties and responsibilities to the trust maker and the beneficiaries.
Traditional finance is based on the premise that investors are able to consider all relevant information to make rational financial decisions. The underlying assumption is that all investors are risk averse and that everyone prefers higher returns to lower returns for the same level of risk. In practice, these assumptions are unrealistic because investors are not perfect and are subject to behavioral biases.
A common misconception many people have is that financial planning is just about investing or planning for retirement. I admit, just a few years ago, I was one of those people.
I am most thankful for my health and the good health of my loved ones. But, good news aside, I’ve been thinking a lot about the end of life recently. No, I’m not depressed or terminally ill. Just like you, I plan to live well beyond my life expectancy. Perhaps this heightened awareness of the uncertainty of life has come about due to the coronavirus and totally unrelated albeit tragic recent events within my own circle of friends. Sadly, I imagine you don’t have to think very long or hard to remember a friend or loved one who is no longer here.
Most people don’t realize that how you hold title to property directly influences your estate plan. Since it’s a common misunderstanding that can dramatically alter your intentions, let’s explore why.
Have you suddenly found yourself with a large sum of cash? Perhaps your windfall was expected, such as from a business sale or inheritance. Maybe it is a pleasant surprise from a large bonus or lottery win. Regardless of how it came to be, there are some critical steps you need to take to protect the windfall now that it is here. It starts with gathering the right team of advisors, working together to ensure that for you, more money does not mean more problems.
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