Have you ever heard the term “stretch IRA”? According to the IRS, there is no such thing. What has become known as a stretch IRA is really a withdrawal strategy geared to spread the tax-deferred status of your IRA assets across multiple generations. Basically this is a provision you can add to any traditional IRA, ROTH, SEP-IRA, or SIMPLE IRA by using a beneficiary designation form.
Typically, a spouse is named as the primary beneficiary of an IRA, with children as the contingent beneficiaries. In this approach, after your death your surviving spouse rolls the balance of your IRA into his or her own IRA. This will allow your spouse to use the money from your IRA to cover his or her living expenses.
Alternatively, if your spouse will not need the assets in your IRA for living expenses in retirement, then you may consider naming your children and/or grandchildren as the primary beneficiaries. This will create the “stretch IRA.” After your death, your beneficiaries would each acquire what’s known as an inherited IRA from which he or she would have to withdraw a required minimum distribution each year thereafter. Here is an example to illustrate:
Do you remember having to wait patiently for someone to return your call, instead of texting them your question? I remember the excitement of call waiting, when it became an option to answer an incoming call when you were already on the phone. At my house now we don’t even have a landline any more. My children will probably rarely encounter a busy signal; they can practically call anyone from almost anywhere. Do you remember having to make an appointment and then wait for the date to talk to the doctor? I recently emailed the doctor my question, and then wondered why it took so long for him to answer.
With cell phones, email and internet at your hip, how do we teach our children we can’t get everything by pushing a button? How do we raise patient children when things are so available and instant to our children? My wife and I have struggled with these questions. (more…)
Recently my wife and I took our children to Disneyland. From Seattle the trip is a quick two-hour plane ride and a short ride to the resort. As fast as the trip appears on paper, I always worry about taking young children on a plane where there is no place to go if that all-too-familiar tantrum occurs.
With that thought in mind, we boarded the plane early to allow the children to get settled into their surroundings before we have to take off. As the kids were working out who was going to sit by the window, I sat in my aisle seat across from them and wondered who would be joining me by my window. (more…)
With the high volatility in the stock market over the past year, emotions have been running at an all-time high for many investors. Staying on track has become harder than ever.
Although the overall stock market has recovered some of its lost ground this spring, many people are still very spooked by stocks. Unfortunately, that trepidation can lead to decisions that investors may later regret.
Long-term investors have two basic jobs: managing their investments and managing their emotions. You can hire somebody to manage your money — and we think you should. But only you can manage your emotions.
This is important because if emotions get out of control, they can undercut even the best money-management practices. (more…)