IRA Tax Consequences
I am 78 years old and married. I have about 1.2 million in tax deferred savings. My savings is in annuities and traditional IRAs. I have two grown children and would like to minimize the tax on the money I leave them. How can I accomplish that? Should I draw down the money and pay the tax during my lifetime?
Terry Says
That likely doesn’t make sense. Withdraw only your required minimum distribution — unless you need more money, in which case take out all you need. But you’ll pay ordinary income taxes on the money you withdraw. And that could not only put you in a higher tax bracket — but also increase your Medicare Part B and D premiums — for yourself and your wife.
And remember, one of you may long outlive the other — and need the money before it ever gets to your children. If one needs long term care, which is not covered by Medicare, that could use up $100,000+ a year!
Make sure you have named your spouse as beneficiary of your IRAs, and annuities — with your children as secondary beneficiaries if anything is left over. They will have 10 years to withdraw from your IRA that they inherit, letting it grow tax deferred — and paying whatever taxes are due at that time.
