Planning for Life

By Harry S. Margolis

We reported on the SECURE Act when it was enacted at the end of last year. (You can read about the rules it changed here.) Since then, we and other attorneys have been parsing it and learning a lot more about how its changes work and how they may affect clients. Here's some of our new learning:

1.  Estates in Progress May Want to Disclaim

Except for eligible beneficiaries (spouses, minor children, and disabled or chronically ill individuals), those inheriting IRAs from decedents dying this year and in the future will have to withdraw and pay taxes on the inherited accounts within 10 years from the year of the original owners death. Those who inherited IRAs from people dying before this year can continue to "stretch" out the distributions through their own lifetimes.

By Harry S. Margolis

At the end of 2019, Congress passed new rules governing retirement accounts known as the SECURE Act, an acronym standing for Setting Every Community Up for Retirement Enhancement. A big part of the bill encourages small employers to band together to offer retirement plans, which is the reason for the title. But here's what may affect you and your family:

1. Later Required Beginning Age. For those who have not already reached age 70 1/2 by the end of 2019 (meaning they were born after June 30, 1949), they can delay taking their required minimum distributions until the April 1st of the year they reach 72, rather than 70 1/2. If you were born after June 30, 1949, you can still choose to withdraw without penalty, other than paying taxes on the amount withdrawn, any time after age 59 1/2, you just don't have to do so quite as early.

By Harry S. Margolis

In her new podcast series, Reset Retirement, New School of Social Research economics professor Teresa Ghilarducci interviews Baby Boomers and others about their retirement situations, which are mostly dire, and experts about why this is the case.

Very few workers today, other than public employees, have pension plans. Instead, except for Social Security, we are all dependent on our own savings. The result is that very few Baby Boomers have enough saved for retirement, with only 15 percent having more than $500,000 in savings according to the following chart:

By Harry S. Margolis

Almost 30 years ago, my father wrote a book titled Risking Old Age In America, which described the plight of seniors in the United States who faced severe income gaps, limited assistance for care at home and deplorable nursing homes. A lot has changed since then, but many of the same challenges persist or have gotten worse.

With the advent of the assisted living industry, there's an alternative to nursing homes. Home care services have expanded as has government assistance to pay for home care. Nursing homes have improved, and seniors enter them later in life when they need more care, meaning fewer are institutionalized for year after year.

By Harry S. Margolis

I've often heard that taxpayers should make their charitable contributions from their IRAs rather than from their other savings, but didn't understand why until recently. It seemed to me that any tax incurred by withdrawing funds from the IRA would be offset by the charitable deduction available for making the gift. So the result would be the same whether the taxpayer withdrew the funds from the IRA and subsequently made a charitable gift of the same amount or made the donation directly from the IRA.

By Harry S. Margolis

When you consult with your financial advisor or planner, does she put your interests first, or is she simply under an obligation to sell products that are "appropriate"? If you don't know, ask.

By Harry S. Margolis

Do you hope to leave your children an inheritance? If so, what sacrifices are you willing to make to assure that you do so. Are you working longer or scrimping on spending for yourself? If so, why? Haven't you raised your children and perhaps paid expensive college tuitions? Shouldn't they be able to stand on their own two feet?

By Harry S. Margolis

There are two kinds of annuities: variable and immediate. Both can be useful for retirement planning purposes and both can be misused. Variable annuities have gotten a bad reputation in recent years because they are often sold to people, especially seniors, for whom they are inappropriate. Immediate annuities, on the other hand, may be undersold.

By Harry S. Margolis

If you leave a 401(k) plan or individual retirement account (IRA) to your spouse, he will be able to roll it in with their own IRA. It will be subject to the same rules regarding minimum required distributions (MRDs) as apply to the retirement plans already owned. He'll have to begin taking withdrawals from them the year after he turns 70 1/2. In addition, he will receive the same creditor protection that his other retirement accounts receive—in bankruptcy proceedings, 401(k) and IRA funds are protected.

In general, under the 2005 Bankruptcy Code, IRAs and other retirement accounts, such as 401(k)s and SEP plans, are protected in the event of bankruptcy by the owner—which is one more reason to fund your retirement plan with as much as possible. But what about an inherited IRA? The U.S. Supreme Court decided in the 2014 case, Clark v. Rameker, that these types of retirement accounts do not enjoy any bankruptcy protection.