The Retirement and IRA Show

Jim and Chris discuss listener emails on Social Security timing, whether you can “leave” your Social Security benefit to a spouse who doesn’t independently qualify, having a spendthrift trust purchase an annuity, and using a revocable living trust to manage aging parents’ complex financial affairs.

(13:15) A listener born in November asks what their Social Security benefit would be if they begin claiming now, before full retirement age, while still earning $100,000, and when the earnings penalty would lift.

(25:15) Jim and Chris field a question on whether you can “leave” your Social Security benefit to a spouse who does not independently qualify for Social Security.

(34:00) George asks how to structure his estate so that one child receives an inheritance in installments over 20 years rather than as a lump sum, and whether a trust purchasing an annuity could accomplish that goal.

(1:11:30) The guys hear from a listener who explains how being added as co-trustee on his aging parents’ revocable living trust resolved the recurring problem of financial institutions refusing to honor their power of attorney.

The post Social Security, Spendthrift Trust, Living Trust: Q&A #2613 appeared first on The Retirement and IRA Show.

If you would like to skip over Jim and Chris’s banter on the weather, that manages to touch on Colorado water rights (an issue many east of the Mississippi probably find baffling), then you can start listening at (11:45).

Chris’s Summary

Jim and I continue our look through the Ed Slott IRA quiz, covering IRA recharacterization rules, how a surviving spouse may use a deceased spouse’s five year period following a spousal rollover, which IRA funds can roll into an employer plan, and the timing trap that can unravel the strategy of using an employer plan to separate after-tax basis from pre-tax funds.

Jim’s “Pithy” Summary

Chris and I are continuing our run through the Ed Slott IRA quiz — the questions Ed sends out after his twice-yearly training sessions to make sure advisors know not just the right answer but the reasoning behind it. That reasoning is where most people get tripped up, and this episode has several good examples of exactly that.

We start with IRA recharacterization rules — the deadline, what has to happen at the custodian level, how attributable gains or losses factor into the math, and a conversion planning tool that Congress took away in the 2018 Tax Cuts and Jobs Act. It was a strategy that made conversion timing far more forgiving than it is today, and the fact that it is gone still stings. From there we get into the Roth IRA five-year rules — specifically a spousal rollover scenario with a twist that most people, including Chris, do not see coming. The answer turns on a benefit the tax code extends to surviving spouses that is easy to overlook if you are not specifically looking for it.

We wrap up with which IRA funds can actually be rolled into an employer plan and why that distinction matters if you are sitting on after-tax basis inside a traditional IRA. There is a clean strategy for separating it, but there is also a timing mistake that catches people who think they have successfully pulled it off — when they have not. More people fall into that trap than you would expect, and the consequences are not trivial.

The post Ed Slott IRA Quiz Continued: EDU #2612 appeared first on The Retirement and IRA Show.

Jim and Chris discuss listener emails, opening with listener PSAs on Medicare Advantage HSA reimbursement eligibility, then moving into questions on Social Security beneficiary rules and finishing their look at conduit trusts for IRAs.

(7:00) A listener asks whether Social Security benefits can be passed on to a significant other.

(28:00) The guys continue from last week with a listener’s multi-part question on whether a conduit trust should be structured to distribute RMDs before allowing any additional withdrawals — as a strategy for controlling how beneficiaries access inherited IRA funds. The listener also asks what else could trigger a large tax bill in that setup, and whether a conduit trust provides creditor protection.

(1:15:30) George asks for the follow-up promised at the end of a recent episode — specifically, the better approach for having a trust inherit an IRA when you’re concerned about an heir mismanaging the funds.

The post HSA Reimbursement, Social Security, Conduit Trusts: Q&A #2612 appeared first on The Retirement and IRA Show.

Chris’s Summary

Jim and I discuss the Ed Slott quiz questions from his November advisor training, opening with the widow/widower tax penalty and required beginning dates for IRA required minimum distributions before moving into inherited IRA rules — year of death RMDs with multiple beneficiaries and the deadline for satisfying them, spousal rollover options, and spousal RMD timing.

Jim’s “Pithy” Summary

Chris and I dig into the Ed Slott quiz from my November advisor training — 20 questions, open book, and I scored 100 this time. We have been doing this for years and it is not just a matter of asking the question, giving the answer and moving on. We get into the rabbit holes, explain the nuances, and use it as a chance for everybody listening to test their own knowledge.

We open with the widow/widower tax penalty and required beginning dates for IRA required minimum distributions — and the widow/widower question has nothing to do with IRAs but everything to do with retirement planning. The younger a spouse passes away the more intense the penalty, and the longer both of you live together the less it bites.

From there we get deep into inherited IRA rules, which make up the bulk of the episode. How year of death RMDs work when there are multiple beneficiaries, and what the deadline is for satisfying them — there is a question in here that Ed Slott himself argued both sides of for years because the IRS never gave guidance until July 2024. We close on spousal rollover options and RMD timing rules that only apply to surviving spouses. A spouse has choices that no other beneficiary has, and the decision of which way to go can look very different depending on the ages involved. Chris makes the point well — whenever a spouse dies, hit the pause button before you do anything.

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Chris is joined by Jake Turner to discuss listener emails on tax filing for mega backdoor Roth contributions, use of HSA funds, I Bonds redemption timing, lowering RMD pressure, and Roth conversions.

(6:30) George asks whether leaving a 1099-R off a return after after-tax 401(k) money was immediately converted to Roth means an amended return is needed or whether the IRS will simply follow up.

(12:15) A listener asks whether HSA funds can be used pre-tax to pay fully self-funded health insurance premiums.

(17:30) The guys are asked how to evaluate redeeming high fixed-rate I Bonds over several years versus waiting until maturity and risking a large one-year tax bill and IRMAA hit.

(30:45) Chris and Jake hear from a widowed listener looking for ways to reduce future RMDs and IRMAA without using Roth conversions or QCDs.

(47:45) Another listener asks whether doing very large Roth conversions over a few years could make more sense than staying within lower tax brackets over a longer period.

The post Tax Filing, HSAs, I Bonds, RMDs, Roth Conversions: Q&A #2611 appeared first on The Retirement and IRA Show.