San Fernando Valley Los Angeles Attorneys
Navigation Two
Phone Number

Entries in retirement (3)

Thursday
Dec032015

Tax Planning Before Turning 70: What You Should Know About RMDs

Trusts & Estate Planning

 

 

by Kira S. Masteller

818.907.3244

 

 

Tax payers aged 70 ½ or older this year must take a Required Minimum Distribution, or RMD, from their traditional IRAs (Individual Retirement Arrangements), SEP (Simplified Employee Pension) IRAs, SIMPLE (Savings Incentive Match PLan for Employees) IRAs, or retirement plan accounts. RMD reporting is required for inherited IRAs as well.

Those who do not take distributions in time may be subject to a 50 percent excise tax on excess IRA accumulations.

RMDs: The Devil in the Details

Keep in mind:

1. Defined Contribution Account owners may be able to wait until retirement to file a report. 

2. Those who turned 70 ½ in 2015 must report a RMD before April 1, 2016 – unless they turned that age in the first half of the year. If that’s the case, the first RMD report must be made before December 31st of this year. 

3. First year reporters who wait to report in April will be required to report twice (which could raise tax obligations) because they are required to report an RMD again before December 31st. This is why it’s important to begin tax planning for RMDs at age 69. 

After the first year, IRA owners are required to report annually by year’s end. 

4. Life expectancies of the taxpayer and the taxpayer’s spouse will play a factor. See the IRS’s resources for calculating RMDs for more information, but it essentially comes down to the taxpayer’s account balance the preceding year’s end, divided by an IRS life expectancy factor. 

5. Taxpayers who have forgotten to take RMDs in the past should take all of them as soon as possible, because of the excise tax mentioned above.

Retirees and other tax payers who don’t need their RMDs might consider reinvesting those funds into a Roth IRA, which won’t require withdrawals until after the account owner passes, or a grandchild’s 529 college savings account. And there are other planning tools available to help reduce your taxable estate. Simply speak with your accountant or trusts & estates attorney for more information.

 

Kira S. Masteller is a Shareholder in our Trusts & Estate Planning Practice Group. She may be reached by email: kmasteller@lewitthackman.com or by phone: 818.907.3244.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Thursday
Aug162012

Social Security Benefits | 10 Retirement FAQs

Trusts & Estate Planning

by Kira S. Masteller
818.907.3244

 

We've all heard about the financial difficulties engulfing our nation's Social Security program.

Decades ago, there were nearly five workers paying into Social Security for every one person receiving benefits. Today, there are nearly three workers paying into the program for every one beneficiary, and that ratio is steadily decreasing.

But according to the Associated Press, we have over two decades before Social Security beneficiaries will see a cut in benefits, and there's some (albeit slim,) hope that Congress  will overcome the deficit hurdles in that time. Whether or not a viable cure for the program's ills can be found, it still may be strategic for baby boomers retiring in the next few years to wait to file for benefits.

But how do you know what to do and when to file?

Here are 10 Frequently Asked Questions regarding your filing for Social Security, whether your household has one working spouse or two.

 

Retirement Planning: Social Security Retirement Ages & Benefits

 

1. Why do people defer their Social Security benefits to age 70 when they can receive checks at age 66?

Under the current program, deferring the payments increases the benefits by eight percent annually. 

 

2. Why take benefits at an earlier age?

Consider your health. Currently, men who are aged 65 today can expect to live to 83, while 65 year old women can expect to live to 85. These are merely averages. If you think you are in poor health, you may want to take your Social Security benefits now, rather than wait until you are 70. 

 

3. Is a spouse who never worked entitled to a spousal benefit at age 66?

Yes. Spouses without a work history are entitled to half of his or her working spouse's benefit, but can't collect until the working spouse elects to receive his or her own benefit. 

 

4. CAN A WORKING SPOUSE DEFER A BENEFIT TO AGE 70, BUT ENABLE THE NON-WORKING SPOUSE TO COLLECT A SPOUSAL BENEFIT AT AGE 66?

Yes. The working spouse may "elect and suspend" Social Security benefits, which allows that working spouse to wait for the higher benefit at age 70, and still allow the non-working spouse to collect benefits at age 66. 

 

5. What if the non-working spouse doesn't collect benefits at age 66?

The spousal benefit deferred won't mean bigger checks. But a non-working spouse who waits to file for benefits may file for retroactive benefits. 

 

6. If one working spouse who earned less defers the benefit to age 70, and the other working spouse earned more but opted to take benefits at age 66 – can the deferring spouse receive a spousal benefit?

Yes. The deferring spouse can take a full spousal benefit, or 50 percent of the benefit of the spouse who is receiving Social Security at age 66, which won't affect or diminish the deferred benefits. 

 

7. Will the working spouse who opted

for benefits at age 66 be entitled to a spousal benefit when the deferring spouse turns 70?

Yes, though that spouse should ask the Social Security Administration to determine whether or not taking the spousal benefit would be beneficial. 

 

8. What if both spouses earned high incomes throughout their work histories?

You can still use the "elect and suspend" option above. The spouse who took the spousal benefit gets four additional years of income, and their own higher benefit at age 70. 

 

9. If both working spouses plan to defer to age 70, can each spouse elect to receive spousal benefits?

No. A married couple may only receive one spousal benefit at a time. 

 

10. What if I was forced to retire, but didn't really want to?

The Social Security Administration will allow you to collect benefits for up to a year, and pay them back so that you can receive higher benefits later. You can only do this once though, so when you retire after the first time, make sure you are ready!

According to the Social Security Administration website, the first person to receive monthly retirement checks from Social Security paid into the program for three years. Ida May Fuller's accumulated taxes in that period totaled $24.75. Fuller's first retirement check totaled $22.54, but since she lived to be 100 years old, she collected over $22,000 in Social Security benefits in her lifetime.

None of us will get that large of a return on our Social Security taxes anymore. But with a little planning for the future we may still make the best of retirement.

 

Kira S. Masteller is an estate and gift tax planning attorney. E-mail her at kmasteller@lewitthackman.com. 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.
Wednesday
Apr252012

Grey Divorce | Things to Consider When Divorcing After Decades of Marriage

Encino Tarzana Divorce LawyerSpousal Support Attorney

 

by Vanessa Soto Nellis
818.907.3274

San Fernando Valley Custody Lawyer Los Angeles

 

The Japanese call it Retired Husband Syndrome. Here in America, the phenomenon is not so cut and dried.

We simply call it Grey Divorce, a trend that sees twice as many marriage dissolutions for the Baby Boomer generation now, than there were 20 years ago, according to the National Center for Family and Marriage Research at Bowling Green State University.

You may have seen the trend for a while: Tipper and Al Gore splitting after 40 years of marriage; Susan Sarandon and Tim Robbins after 23 years; or even the 99 year old in Italy who jammed the news wires last December because he sought a divorce from his wife of 77 years. (The gentleman cites infidelity as the cause, though his wife's affair occurred in the 1940s, and he himself never knew until recently.)

The reasons are varied, ranging from extra-marital affairs, to more financial independence for women, the restlessness of empty-nest syndrome, or the ever-present "growing apart" phenomenon we hear of so often.  A change in lifestyle (like retirement) can accentuate a marriage's problems, and the differing goals of each partner can put strain on a relationship.

Whatever the cause, couples undergoing a Grey Divorce have unique problems in the dissolution process. Sure, the children may be grown so they won't have to worry about child custody or visitation schedules, but there are other elements to consider.

 

Older Divorcing Couples & More Valuable Assets

 


Spousal Support – Many Baby Boomer couples will live longer than the generations that preceded them, and they tend to be healthier than those generations as well. If the spouses are retired there is fixed income that now needs to be used to cover expenses for two households. Thus, one spouse may need to return to work to make ends meet.

People going through a Grey Divorce should remember to consider their future needs.

Retirement Benefits – Whether a spouse took care of the children or worked outside of the home, both parties in a Grey Divorce will need, and be entitled to, retirement benefits. The retirement accounts will be divided.

Financial Management – It's often challenging for a spouse who hasn't handled the finances before to have to do it all of a sudden. It's important to work with a CPA or financial planner to make sure enough money is set aside for taxes, and that a budget is established to meet living expenses.

There are other considerations as well. Older divorced people who don't have any children should think about updating their retirement and estate beneficiaries…9 times out of 10 the beneficiaries are the ex-spouses.

Whatever the reasons for a divorce, there are always obstacles that will need to be considered carefully before they can be overcome. An experienced family law attorney can help with many of these, and recommend insurance or estate planning professionals to help with the others.

 

Vanessa Soto Nellis is a Divorce and Family Law Mediation Attorney in our Family Law Practice Group. You may contact her via e-mail: vnellis@lewitthackman.com.

 
Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

 

LEWITT HACKMAN | 16633 Ventura Boulevard, Eleventh Floor, Encino, California 91436-1865 | 818.990.2120