How about a spouse who inherits the IRA. No ten-year rule, but there are still required RMDs. Not so bad? Think again: the surviving spouse is now a single return filer – not joint – and guess what that does: it halves the available deductions and tax brackets. Maybe the only one more ‘secure’ is Uncle Sam.
You can learn more about the SECURE Act in my video.
What can you do? Start your income planning before you need to withdraw income.
One possible strategy is to think about accelerating your IRA withdrawals when taxable income is generally reduced early in retirement. It would be taxable income, but maybe better now than later (talk with your advisor). This may also allow you to defer Social Security benefits to age 70 to maximize them. A series of Roth conversions would allow the money to grow tax-free, too!
How about beneficiary planning? Maybe you don’t want to simply divide all accounts evenly. Again, why include Uncle Sam among your heirs? You may, for example, give the child with the lower taxable income the IRA, while giving the higher tax child your other taxable accounts or Roth IRAs.
You’ve been accumulating for years – that strategy was easy: keep saving and socking it away. The decumulation phase requires a more sophisticated planning strategy – unless you really like Uncle Sam and want to make him a favored beneficiary.
