It's the Worst $ to Leave Your Kids
RMD RETIREMENT MONEY
The worst money? It's the qualified money - your IRA$, your 401k$, your RMD$. What were you saving that $ for? You're supposed to be spending that money. Where can you get the most amount of money after taxes and have it last forever? Don't just take your RMDs and pay the tax. Why not receive your full RMD before tax and let your guaranteed income for life pay the tax? The kids are always going to get whatever is left over after you leave this world.
Here's some numbers to consider: Let's look at a $250,000 IRA. The 2020 SECURE Act's new age for Required Minimum Distribution starts at age 72 now. The IRS Uniform Lifetime Table says the divisor for age 72 is 25.6.
250,000/25.6 = $9,765.63, the RMD. If this individual is in the 30% tax bracket, then 9,766 X 30% = $2,930, the tax. The RMD + the tax = $12,696. 12,696/250,000 = 5% withdrawal rate. An A+ rated insurance carrier has a product with a guaranteed joint lifetime payout at age 72 of 5.39%. This person would be able to cover his/her RMD PLUS the tax with a guaranteed payout for life including his/her spouse and have 1/3 % left over - and that's if the individual STARTED the annuity at age 72. If the annuitant started the annuity at age 52, the payout % at age 72 would be 10.84% with joint coverage - that's $2,258 to spend per month guaranteed for 2 lifetimes. Here's the cherry on top: if both parents lived to age 87, they will have withdrawn between $146,000 to $406,500 from the IRA, depending on when they initiated the annuity, and even if the annuity averaged 5 1/2% return annually, there would still be a portion of the $250,000 principal that would go to the kids and/or grandkids when both parents are no longer living.
CLARITY FINANCIAL INSURANCE | BILL MOELLER