Any Accountants here that can help me?

[DLgal]

Do you mean I could make more money putting it into an HYSA than I would save paying down the mortgage?

What's your mortgage rate? If it's less than 3%, yes, that's what I mean. In fact I just read an article on this very situation yesterday. HYSA are paying more than many sub 3% interest mortgages, making them a smarter investment right now.

 

[lukenick1]

What's your mortgage rate? If it's less than 3%, yes, that's what I mean. In fact I just read an article on this very situation yesterday. HYSA are paying more than many sub 3% interest mortgages, making them a smarter investment right now.

Unfortunatley no, it is above 3%.

 

[DLgal]

Unfortunatley no, it is above 3%.

Well then, pay down the mortgage!

 

[tvguy]

My CPA can't answer these questions for me they tell me to call the financial advisor and the FA tells me to call the CPA. So frustrating!

That REALLY sucks because those are the two people you should be consulting.

I can't speak to your situation, I just know that IRAs can be confusing based on when they were opened, how they were set up, and if the owner had started taking distributions, and the biggie, whether the laws have changed.

My mother's in law died without touching her IRA and based on how it was set up, we HAD to take a lump sum distribution and pay 50% of it in tax.
My mom started taking minimum distributions at age 70, and too only that amount until age 90 when she passed. At the time she started taking distributions, you could lower the minimum distribution by also factoring in the beneficiaries life expectancy along with the owners. That is no longer legal that I am award of. I could cash it in and pay the tax, or I could continue the same distribution she had been taking, so I continued taking those minimum distributions just like she did and not touched it otherwise.
And my wife and I rolled our 401ks into IRAs when we retired last year and now, our kids have a choice of taking a lump sum and paying the tax, or taking it over 10 years, but the money has to be all out of the IRA within 10 years of our death.

 

[lukenick1]

If you are less than 10 years younger than her, you're an Eligible Designated Beneficiary. Since she was under 72 at time of death, you can choose 1) Lump Sum cash out, 2) Life Expectancy Method (and RMD must start by Dec 31 of year after death), or 3) 10 year method (full distribution by Dec 31 of 10th year after death). If you had not been an Eligible Designated Beneficiary, you'd have to use the 10 year method.

Sounds like, if you did not take RMD by Dec 31, 2021, then you chose the 10 year method. If you didn't mean to choose this, you need to take 2021 RMD immediately (and don't forget to take 2022 RMD in a separate transaction). File form 5329 with your tax return which will report a 50% additional tax on the late 2021 RMD, but don't pay it- attach a letter explaining why you didn't take RMD timely (i.e., you didn't know you had to, you have since taken it, and you will not mess up again in the future). Hopefully they waive it and you won't owe the tax. If not, you'll get a bill for the tax plus interest.

I think you have to calcluate RMD yourself since this is not an employer sponsored plan. Try here to help.

Source: I'm a tax attorney. But not YOUR tax attorney. So, take my knowledge above as a starting off point to do some research on your own.

Amy can I PM you?

 

[AmyMac1109]

Amy can I PM you?

Sure.

 

[Anthony1971]

I just went through this with this with a 401K however the person who passed was already taking distributions.
The information is correct above not to get into to detail the rules are changing supposedly in 2023 or clarification and maybe taxation rates which is why the waiving as the rule wording was unclear.
As far as when to take a distribution I would consider your tax situation. In other words do you think you will be making more money in 8 years (goinng by your dates) or less money. If you end up in a higher income bracket you will pay more taxes. Other things to consider are state taxes. If you live in a state that has no Income tax or will move to one or move to a state that maybe has income tax the income will be taxed by the state you line in as normal income. You can also take minimum distributions or more or none at all over the 10 years period (this is where a lot of the unclear wording was) I would look at taking a minimum Dist. if your tax situation will not change over the years. Taxes are tiered in other words From X to X you pay 0% the next X to X you pay 10%................ So if 8 years from now (using the time I assume you have left) you win or earn a large sum of money and now have to take the full amount you can then say you will pay the top tax amount on this money as it is income you would have not had under normal circumstances. On the flip side if you have no income that year you may have no taxes on the money. Your end goal is to pay the least taxes on this money. You can make the same investments with the money in the current IRA or outside of it and have the same result with the exception of the amount of tax you pay. A CPA should be able to guide you however I would think you know your own financial situation and can make an informed decision on your own. BTW many CPA's will tell you to follow the 10 year rule and take minimum Distributions every year which goes back to the unclear wording however they are not wrong as CPA will always be on the conservative side as the wording of the rule could mean either way. Bottom line is you do not have to take a distribution until the end of the 10 Years as stated above. A CPA can guide you with Taxes period most as above are conservative and will never say put your money here..... they will almost always say FDIC insured bank..... A financial adviser will tell you put money in this Fund or stock..... Please listen to any advice you are given from a Financial Advisor, Friend, relative, neighbor, Internet board or what have you think about and decide what is right for you.... A high yield bank account is great for some, all levels of Mutual funds with diffrenet levels of risk, a Hot stock tip from the guy across the bar for others or maybe putting it all on a sure win horse...............

 

[DLgal]

OP, your main takeaway from this situation should be:

You need a new FA and CPA. Both these people SHOULD have been able to answer this question and also advise you the best course of action.

 

[HopperFan]

That REALLY sucks because those are the two people you should be consulting.

SERIOUSLY!

My mom started taking minimum distributions at age 70, and too only that amount until age 90 when she passed. At the time she started taking distributions, you could lower the minimum distribution by also factoring in the beneficiaries life expectancy along with the owners. That is no longer legal that I am award of. I could cash it in and pay the tax, or I could continue the same distribution she had been taking, so I continued taking those minimum distributions just like she did and not touched it otherwise.

Yeah .... I inherited one directly to me (no probate) and inherited one with my siblings so via the estate. Mom passed in 2020 and was taking withdrawals. Supposedly the law changed at that point so the 10 year stands BUT the adjusted age did not change AND we have to take HER minimum each year. Sounds like that is what you are saying. NOT what I had hoped because DH is still working and I hoped to push off two years. Oh well it is what it is. I'm using to pay off the FL mortgage so even with owing more taxes what I'll save on the mortgage will make up for it.

Here is the crazy. I kept the split one where it was. My sister moved hers to Schwab. I don't know how they set hers up or if it was even correct but they changed her minimum to her age, where I left mine says that is not possible with her already starting to withdrawal. I even verified with their IRA dept. Somebody is wrong. At least I know I won't get hit with penalties. She might. From what you are saying her advice was wrong, which is how I read the paperwork.

And my wife and I rolled our 401ks into IRAs when we retired last year and now, our kids have a choice of taking a lump sum and paying the tax, or taking it over 10 years, but the money has to be all out of the IRA within 10 years of our death.

Interesting on the 401K to IRA. Going to look at that.

 

[lukenick1]

Thanks everyone for the great advice. Appreciate it.