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  • Avatar HumbleInvestor 
    Participant
    Status: Physician, Small Business Owner
    Posts: 229
    Joined: 12/28/2016

    Does it make sense for a 65 year old with yearly income in the 0% bracket to start contributing to Roth? Let’s say they dont have any other expenses or use for their income. Can Roth accounts be passed to grand children or skip generations? Are there tax implications any where in the line under current laws?

    #237891 Reply
    triad triad 
    Participant
    Status: Dentist, Small Business Owner
    Posts: 279
    Joined: 04/29/2016

    sounds like a great idea.  there are RMD’s though

    https://www.marketwatch.com/story/i-inherited-a-roth-ira-now-what-2013-06-28

    #237893 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4695
    Joined: 01/08/2016

    if you have earned income then yes, do it.

    #237894 Reply
    Liked by SLC OB
    Avatar molar roller 
    Participant
    Status: Dentist
    Posts: 87
    Joined: 05/31/2018

    Sounds like a perfect time to do it… and put it in the most aggressive  growth-oriented investments within your asset allocation.

    #237895 Reply
    Avatar HumbleInvestor 
    Participant
    Status: Physician, Small Business Owner
    Posts: 229
    Joined: 12/28/2016

    Thanks for the RMD info. Now can the beneficiary be the grand children or great grant children? I am thinking the RMD’s are dependant on their expected life expectancy. If they are minors will they have to open a UTMA account to put the RMDs into it assuming they dont blow it off?

    #237904 Reply
    Avatar GasFIRE 
    Participant
    Status: Physician
    Posts: 231
    Joined: 01/08/2018

    sounds like a great idea.  there are RMD’s though

    https://www.marketwatch.com/story/i-inherited-a-roth-ira-now-what-2013-06-28

    Click to expand…

    Are there tax implications any where in the line under current laws?

    Click to expand…

    The info in the article @triad referenced is correct under current law. However, you should be aware that if some form of the SECURE Act is passed by the Senate (the House has already done so) the non-spousal inherited Roth IRA RMD will no longer be base on the beneficiaries life expectancy but will require full distribution within 10 years. May or may not change the decision, but it is something to be aware of. Several discussions regarding the effect of the SECURE Act can be found in this forum.

    #237924 Reply
    Liked by Infinity
    Faithful Steward Faithful Steward 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 519
    Joined: 06/12/2017

    If no earned income, consider Roth Conversion.

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors
    https://ProsperousPhysician.com | (717) 496-0900

    #237937 Reply
    Dreamgiver Dreamgiver 
    Participant
    Status: Physician
    Posts: 895
    Joined: 03/09/2017

    Wouldn’t IRA accounts become problematic though when it comes to medicaid eligibility and such? For instance, a medical catastrophe happens, wouldn’t Medicaid require you to deplete the IRA before kicking in?

    #237941 Reply
    Avatar spiritrider 
    Participant
    Status: Small Business Owner
    Posts: 1974
    Joined: 02/01/2016

    In a Medicaid expansion state, there is no asset test, just income.

    #237964 Reply
    Liked by Dreamgiver
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 2186
    Joined: 02/11/2019
    Earnest refinancing bonus

    We are comparing puting some money in Roth vs taxable. Of course the Roth makes sense. Tax free growth. Tax free gains. Asset protection. All good things.

    “Never let your sense of morals prevent you from doing what is right.”

    #237972 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8365
    Joined: 01/09/2016

    At age 65, my typical recommendation is Roth conversions, as already referenced by @Faithful_Steward. Roth contributions are fine, too, but the impact at this point is relatively negligible. Hopefully, this person has an IRA and/or a 401k that s/he can begin converting to a Roth. At a minimum, s/he should fill out at least through the 12% bracket, maybe even through the 24% bracket, depending upon the ability to pay taxes and the tax brackets of the intended recipients.

    If the recipients will be in the top marginal bracket, one technique is for the 65-y.o. to convert through the 24% bracket and for the eventual recipients to loan the $$ at a reasonable rate of interest to pay the taxes. A clause w/b added to the LWT to ensure the taxes are repaid from the estate at death.

    Johanna Fox Turner, CPA, CFP: I am not your financial advisor; any responses are for general purposes only
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #238026 Reply
    Avatar HumbleInvestor 
    Participant
    Status: Physician, Small Business Owner
    Posts: 229
    Joined: 12/28/2016

    Thanks for the input. Unique situation. No IRA or other retirement assets. All expenses are taken care of by family and has this little income stream from part time work. So far just leaving it in a bank account. Trying to see the best uses for this money where it can be invested for grandkids or great grandkids if they pop up by the time of eventuality.

    #238080 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8365
    Joined: 01/09/2016

    Thanks for the input. Unique situation. No IRA or other retirement assets. All expenses are taken care of by family and has this little income stream from part time work. So far just leaving it in a bank account. Trying to see the best uses for this money where it can be invested for grandkids or great grandkids if they pop up by the time of eventuality.

    Click to expand…

    A taxable account would be almost as good, as heirs would get a stepped-up basis.

    Johanna Fox Turner, CPA, CFP: I am not your financial advisor; any responses are for general purposes only
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #238090 Reply
    Avatar borg 
    Participant
    Status: Physician
    Posts: 30
    Joined: 03/21/2019

    At age 65, my typical recommendation is Roth conversions, as already referenced by @Faithful_Steward. Roth contributions are fine, too, but the impact at this point is relatively negligible. Hopefully, this person has an IRA and/or a 401k that s/he can begin converting to a Roth. At a minimum, s/he should fill out at least through the 12% bracket, maybe even through the 24% bracket, depending upon the ability to pay taxes and the tax brackets of the intended recipients.

    If the recipients will be in the top marginal bracket, one technique is for the 65-y.o. to convert through the 24% bracket and for the eventual recipients to loan the $$ at a reasonable rate of interest to pay the taxes. A clause w/b added to the LWT to ensure the taxes are repaid from the estate at death.

    Click to expand…

    JFox—is there an easy guide or something to figure a plan for this?  I think I need to recommend this for my mom (71) who’s still working part time, they’re not taking any withdrawals aside from RMD and living on SS.  I think she only has maybe 30k in Roth and several hundred in tIRAs.   Think they’re in lowest tax bracket (living on ~75k/yr).  So should they just move convert X amount each year, but not enough to bump a tax bracket?

    #238176 Reply
    Avatar GasFIRE 
    Participant
    Status: Physician
    Posts: 231
    Joined: 01/08/2018

    @borg – unfortunately there is no Easy button for determining the advisability of Roth conversions. Multiple moving parts/concerns/desires can make each assessment unique. Assuming your mother is MFJ, her next tax bracket begins at $78950. With several hundred K in the tIRA there isn’t much room left for effective Roth conversion while remaining in the 12% bracket and would have to be willing to move up into the 22% bracket. As Johanna noted before, whether this is advisable or not depends on the ability to pay the additional income tax and the tax bracket of the intended beneficiaries. While not applicable in this particular case,  it’s usually more efficient to Roth convert before RMDs are required.

    #238460 Reply
    Liked by jfoxcpacfp, borg

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