Law & Grace: IRAs

Welcome to finishing well brought to you by Cardinal.com certified financial planner on six child best-selling author and financial planner helping families finish well over 40 years of finishing well will examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Medicare IRA long-term care life insurance and investments and taxes. Now let's get started.

Finishing well today on well go to law versus you know some of you unless experiences of the law says that I need to get up every morning and pray. So if you are required to get up and pray you know exactly how many minutes of my required to pray and and that sense of obligation that sensitive. It's the law. This is what you have to do versus the person is living by grace is like man I get the get up and talk to the maker of the universe to guide you made the stars I get the check with the choice to do that and I have the freedom by grace to get up and really enjoy his favor and spend time with him in that's kind of the law versus grace when it comes to prayer and so we wanted to spend a little time talking. Today the law versus grace on IRAs environment intoxicant investment, retirement accounts, right ponds.

That's right, and but before we get too much into this conversation or talk about mostly qualified one's rights. If you sense over time, the money that you have an IRA. Maybe it was previously in a 401(k). Maybe it's still in the 401(k) and you haven't done anything with a better postretirement were talking about money that you have yet to pay the taxes and the government wants their money they're going to get their money either from you or your from your heirs and were talking about planning.

It really deciding what you gonna do about this money trying the hands that that falls on this this thing called RMD, you may first talk about that before, which is you take the IRS's version of what that says or the so security ministry. It's the required minimum distribution but is Robbie's concept today show that you're working to change that is like if you were to take that into the law versus grace thing.

What's the required RMP required minimum prayer. How many minutes a day. Do I have to pray in order to be in God's or versus the complete good really and Ellen this is what I'm changing it to instead of required minimum I'm changing into really motivated. So what are my really motivated to pray every single day versus what am I really required at so if we do that with this required maximum distribution minimum minimum distribution that I want to change that to Mark. What's my really motivated distribution. What's my really motivated reason to pray more. Again, going towards grace rather than law and so unfortunately, if we take the minimum, the laws version of the minimum required distribution that's kind of like going right along what the government wants you to do right on and pay taxes back there.

Try to get the maximum tax they are in. Keep in mind that were not talking about Roth IRAs because their tax-free silo, but a relatively small percentage of the whole IRA and 401(k) money is actually in a Roth's organ to carve that out to the side because they don't have required minimum just okay so were talking about money that you haven't paid tax I was going to do about sees you right this minute and hope you do have a wonderful I 401(k) plan. You have some IRA that you have for your that Sonata Roth that when you turn 70 1/2. All of a sudden the law is coming down on you and you must is a required minimum distribution yet.

Let's talk about this person is, why is the government let you avoid tax or postpone tax on this money along what would you think the reason for that is what Y has just in the general sense of setting up laws and IRS and all that.

Why have they let you postpone taxes or might guess, what is that they were concerned about the Social Security and in China showed up to make sure that people would have money in retirement and so they wanted to give you an incentive to save money by not taxing it in in that's X-Acto okay and then just by the fact that you have not taken distributions to your 70 1/2 and then your planning on just taking the minimum it tells us that you really don't need the income from that money so you saved all this money, you postpone taxes and now you've reached a low pass 70 1/2 and now they're requiring you to pull some out, but by definition, you really haven't needed and what we would love to pass along today for your consideration is. We believe you need to be really motivated now not required minimum but really motivated because here is a tremendous resource that you can use for the kingdom, but you can also use it but let's go back to the Social Security show that we were that we did last week and we are talking about.

Well, I need to wait till I'm 70 to get my maximum Social Security.

But if I wasn't working when I was 66. You could you could figure out a way to try to get really motivated to started distributing my IRA right and not taken your Social Security and delaying until 70 and then you'll have more money that way more money available to you more money to give to your church, if that's what your desires right so that would be 1 Really Motivated Way to know this really works to my benefit to begin to distribute this money before one 70 1/2 at and use that money really to leverage this bigger so security money that I would have coming sure, but then you're going to be still stuck with these minimum distributions. Maybe on a smaller amount. Regardless, I'm looking in my workbook which will talk about in a second, at age 70. You need to take out your RMD, your required minimum distribution is 3.65% of the balance as it was last year and then that doesn't even become 4% until age 73 then become 5% till age 79. It hits six percentage 83 so if you just go with the government's plan you're going to be stockpiled money in your IRA is your to be earning money on this thing. The whole time as well which the reason why that concerns me. If it's my IRA is that if you take that money out.

One great big lump i.e. the people that would get your inheritance because if you die with all that money sit in your IRA then your beneficiaries wherever they are, are going to get one big whopping tax bill. We deal with this every day.

We have clients who have been with us for several years and they pass away.

They have IRA money.

The money goes straight to their kids. That's one good plus in an IRA by beneficiary doesn't go through the will and then the kids sit down with us and they figure out a million take all of the postpone the taxes and most of them do anything for money to cash it in and we help them send in the text of the government and its it's a good minimum similar it. Rather than taking the required minimum distribution which is there RMD. We like the new plan. The grace plan. That's the really motivated distribution and so there is there's other neat really neat things we talked about them before the show.

The QCD out before we get to that and I can always jump ahead of myself.

We need to tell you that you've just heard about that chart. It's in his workbook. Yeah, that's free, absently free. All you have to do is go to the website which is cardinal guide.com and there go to seven worries tab you go to the IRA section on the seven worries and there you can get this this absolute the chapter in both books in the original book you get that work the chapter in the workbook you can download them as PDFs read him and is going to walk you through in 10 to 12 pages. Everything both books is can walk you through everything you need to know about RMD's and more in the general sense and then it's if you get the whole book that you can do. It's available on Amazon. You can get to Amazon in the book through the website. Cardinal guide.com and you can get this we really want to get this information out. I it's a complete Cardinal guide to planning for and living in retirement and in again Cardinal guide.com is the website where you can get that information is written by certified front of our host certified financial planner Hans Schild in today's subject again with IRAs and RMD's which required minimum distribution which I like people. I like the generally were not supposed to get angry but we say people are angry or they just how I go take this minimum.

How much do I need to take, how much is the minimum. How much tax and I get a pay on that people are generally not real happy about this. And then they want to take right at the minimum, and not a penny more right and we talked about why that is and and one of the reasons I'm afraid I might run out of money, not to mention if I been sitting there for you and I have many years look at my 401(k) grow and grow and grow and grow.

You know that's kind of my security like I'm not can run out of money because I got got 60 grant of data hundred and 30 whatever sit there so I can start taking money out.

Then all of a sudden I'm reducing my assets will be if you leave it all in there that may be the best way to run out of money, so that your savings account is that big was qualified need to pay tax if you all of a sudden any year and pull $100,000 out of their all at once to pay a long-term care bill moved to pay for some thing for your children and be just whatever would be in your savings account if you take 100 grand out one year. Add that to your other income and see you at your pay $40,000 of that in income taxes. So if you need to take 100 grand out you have to pull out 150 just to pay 50 and tax you can see more why we need to be really motivated to get some distribution of estate that would make sense for you and your family, your list into finishing well certified financial planner Hans out today. IRAs are really fine-grained law that we hope you are enjoying finishing well brought to you by Cardinal guide.com visit Cardinal guide.com for free downloads of preview shows including episodes about Social Security and Medicare, IRAs, long-term care, life insurance, investments and taxes as well as Hans best-selling book, the complete Cardinal guide to planning for and living in retirement. Plus the accompanying workbook. If you want to follow along with today's topic download free PDF Cardinal guide.com by going to the seven worries tab of today's show topic, just scroll down to useful documents once again for free resources shows go to get Hans book the complete Cardinal guide to planning for and living in retirement or the workload go to Cardinal guide.com you have a question, comment or suggestion for future shows. Click on finishing well radio show and send us a word.

Once again that's Cardinal guide.com Cardinal guide.com now finishing well brought by Arnold guide.com how we have been talking today about IRAs by by grace or by law, is it you know required minimum distribution or is it really motivated distribution in your get to motivated to start throwing money out of it right there. It has to do with planning right what will absolutely mean that the goal here is to figure out what your needs are and if you don't have a need for the income that's maybe Wilde stockpiled to this point. At 74 years to be 74 56 you've taken the money so what we want to do is we want to get on a plan that can have the balance of that thing zero, when you pass away. He said why would I want to do that well.

You'd want to do that to avoid putting this big tax burden on your kids because your kids when you pass away, very likely they're going to be educating their own kids and they've got here what your grandchildren they've got their own needs for money and when they're given a choice between stretching out the tax over a period of time or pay it all right now there to pay it all right now and able to get that money to use for things� So the goal here is to systematically drain this thing. Even if we put the money in another account to high orders that look like to put the money in another account. Let's just say a person has $300,000 IRA and they just turned 70 1/2 and their percentages. We just looked at was almost 4% of his three-point something so this is called 4%.

They go take a $12,000 minimum distribution and with a generally are going to do is pay the taxes and they're going to spend the money okay and so you have to pay the taxes. You can have 78 $9000 left when I'm proposing that we would do with his $300,000 IRA is perhaps we would take 30,000 a look at what that's can do your tax bill. We would take $30,000 instead of 12 and then we had silver.

Time we would not work and take 30 that would take 10% within the IRA manages okay at the end of the one time just one time writing. Take $30,000 and then I'm just given a for instance, your massage and depend upon the person situation, but when you asked with second look like will then now on 30,000 word and have to pay 10 $12,000 of taxes which looks horrible to make even more mad then we can be left with $18,000 and if you don't have a good need for you to talk about Q CDs in the second. Just putting the $18,000 in a taxable account so that it will be there for you.

If you need it and it's now been paid. You paid the tax on the pay the tax so you can just pull out the money and spend it, or it can accumulate you have to pay tax on the growth that we can set that up. Possibly you know postpone that and then really do this every year for several years hundred and 10% for 10 years yeah and I hear any guy in the monies now sitting where you you've got access to it completely or your family has access to it without having to pay inheritance tax. Everything else will you and you probably won't have inheritance tax at this little but you can have income tax due on this money at some point, were just suggesting paying it now systematically and then we can look at some other things to do with atlases move on to the QCD Lesko okay so what a Q CD is a something that your church is going to really love this family be motivated to distribute it that way point were sure they are and you're going to be motivated because it's going to be a way you can give the money to the kingdom to God and if you're doing this anyhow and maybe not getting the tax deduction for a lot of us seniors under the new tax law are not itemized deductions and they're going to get really get no benefit for their ties and that's a whole another story. When we talk about taxes but just if you really want to get a tax benefit. Your tithing you can give part or all of your minimum distribution or exceeding minimum distribution really motivated distribution intake that 10% right give the whole thing directly to the church and never have any taxes since effectively making it like a tax effect right so in the example you'd used on this earlier is your already giving 10% of your income and you're taken up money that you've Artie paid income tax on in order to make that tie them when you do that you essentially you got no tax benefit from a lot of people with the new tax law, but if you're taking that money out of the this that you would normally have to pay income tax on and given it to the church with through this Q CD then. Now you're saving a certain amount of tax which gives you more money to either get to the church or more money to give your family yeah I mean look let's just say in our example of the $30,000 withdrawal.

Let's say that you're now tithing $5000 a year where you could just do 5000 directly out of the 30 that were taken out. Now you're only receiving 25 and five's going straight to the church so your tax bill is going to be less and then your remainder is going to be, you know, probably not more because you've given $5000 directly to the church but you're getting a tax benefit for donating directly to the church so I mean we take that we may come up with different numbers ballistic another scenario.

Let's say you don't go for this draining of the tax Amy just listened all this� Sounds like nonsense to you and you just want my help with the minimum distribution so on. This $300,000 IRA and we have to do the minimum, were now 70 1/2 or older and we got just 4% to make the mass simple.

We got a $12,000 minimum distribution do now organ have to pay a good bit of taxes on that instead of taking that we could just give the whole 12 grand directly to the church under the Q CD you, you pay no income taxes and you now donated $12,000 to the kingdom right and that still use the minimum and and that's can meet your minimums snack and incur any taxes you very well could earn the 4% back and more so you have the same problem next year but there's all kinds of ways to use the maximum on Q CD is $100,000 in any given year. So when you have retired folks that have these very large IRAs and that's a that's a possibility to to sit down and say, working to take this minimum distribution and were going to give either all of it are part of it to the church and then we can avoid the taxes on and in people's awards that leave my kids.

Well, if this is a significant amount.

Your wealth and you want to leave some dear kids, we can still do the minimum distributions we can just buy life insurance and if you're still in reasonable health.

You can have some people in very poor health and where we been able to get a life insurance and you can just pay the premium for that out of the distributions and then when you pass away your children are gonna receive a tax-free inheritance as opposed to this big taxable decision right which is again Landis Billy glass times. To be honest. To do this show to see all the wisdom that's out there and available when you have these assets to maximize you know the tax ramifications maximize what can happen with my family. What they're going to happen with taxes and all these different things, which again is all available and Hans's book the card of the complete cardinal guide to planning for living in retirement again available at his website which is cardinal guide.com if you go to the seven worries tab. We always talk about right there. There you see IRAs and and a lot of people are, they may find this minimum required minimum distribution which I hope after the show your thinking you're really motivated to distribute this money in a way that's really for your family and for the kingdom. I was really cool that you have that resource get this chapter absolutely free of the seven worries tab and you can download it right there. Or, as always, just email or call Hans and say send me the book they want to have the information you send me a message on the thing be glad to send it to either digital or all-male you the paper thing. What I want to show you is the first book is a book of stories is to get you into the subject.

It has teachings in their generally the second book is the workbook where I was just reading those charts out of the in the workbook was written. It has no stories and its faxes. 1012 pages on each chapter of facts which even more important is this book has seven chapters and one of them will has a few more than seven content chapters and only one of them is IRAs which were talking about today but today we talked about income taxes. It's almost impossible to talk about IRAs without talking about taxes. Were talking about investments we talking about long-term care so the seven chapters and seven worries that are on the website.

It's really impossible to look at one of these subjects like required minimum distributions in IRAs without looking at the other six. And that's really what I do in the book and I doing my work is I help people plan for these all seven of these things mixing together like so much that a great other and I get really motivated as he talked about not required minimum because that that sounds too much like the law we want really motivated distribution is is to use that money toward your long-term care insurance will ensure all kinds of ways that we can work all this stuff out in a plan and is really as you said earlier, living by grace instead of living by the law and if you just going to the required minimums and the only thing you look at is the minimum that's all you taken your pay the taxes you're on the government brightness.

It's a similar set up really to the Social Security like they really hoping that you'll take it at 62 and they're really hoping that you'll just go by that minimum distribution because they realize that when people take this money out in chunks is when they really get their maximum tax at 15, I'm sure they do and and and so now here's an opportunity to completely work within the law.

But still, by grace take that freedom that you have and get really motivated to distribute this money in a way that's best for the kingdom of God and for your family palms.

How fun was that those awesome applicants they gave. Thank you for listening is so awesome you guys listen to the show and we just our prayer really is that you will use this wisdom can only further your own family, but further the kingdom of God. Share with other people and you guys think of this definition went with certified member cardinal guide. We hope you enjoyed finishing well brought you by cardinal guide.com visit cardinal.com for free downloads of the show previous shows on topics such as Social Security, Medicare and IRAs, long-term care and life insurance, investments and taxes as well as cons best-selling book, the complete cardinal guide to planning for and living in retirement and the workbook once again for dozens of free resources past shows what you get. Hans book go to cardinal.com if you have a question, comment or suggestion for future shows. Click on the finishing well radio show on the website and send us a word. Once again, that's cardinal guide.com cardinal guide.com