/ Ask Terry Questions / Defining ownership of retirement account and tax info

Defining ownership of retirement account and tax info

By Terry Savage on June 15, 2022 | Financial Planning / Retirement

Terry,
My husband retired and has a decent account with Fidelity. His name only is on the account. My question is when time comes that he has to start taking money out because of age is it true that it can be withdrawn as a gift say to our children without paying taxes?
Or can the same be gifted to me his wife? He also has approx $100k that was deposited after taxes years ago and is differentiated on the statements. Are taxes still owed on that or at a different percentage? Any clarification you can offer on any of these points would be greatly appreciated. Thank you. Also, enjoy listening to you on WGN.

Terry Says

These are HIS retirement accounts. But you should be sure he has listed your name as beneficiary on this account.
Any after-tax contributions and the earnings on them will be taxed at his (your joint) ordinary income tax rate upon withdrawal. Then he can do whatever he wants with the money — gift it to children or to you or spend it on retirement expenses.
Any pretax contributions and the earnings on that portion can be withdrawn any time without paying any taxes. Again, he can do whatever he wants with the money.

That’s why Fidelity notes the amounts separately. Any withdrawals should be clearly marked as coming from one or the other portion, so appropriate tax withholding can be made from the taxable portion.

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