The Retirement and IRA Show

If you would prefer to skip Jim and Chris chatting about fall weather in Colorado and Ohio, Jim’s upcoming trip to Nashville, and country music, you can skip to (11:30).

Chris’s Summary

Jim and I look at stretch IRA eligibility after the SECURE Act and who now qualifies as an eligible designated beneficiary. We start with why naming a beneficiary matters, then trace how the stretch was assembled from the Keogh Act, TEFRA, and IRS regulations before SECURE curtailed it. From there, we define the five categories still allowed to stretch, how the date of death determines eligibility, and how IRAs and employer plans treat disability and chronic illness certification differently.

Jim’s “Pithy” Summary

Chris and I take a deeper dive into eligible designated beneficiaries, something that seems benign but isn’t as straightforward as it sounds. What a lot of people don’t realize is that Congress never created the stretch IRA. It was stitched together like Frankenstein from two different acts and separate IRS regulations, and it got so ingrained that it took a specific act of Congress to greatly curtail it. Under the old rules, if a 1-year-old inherited an IRA, it could stay open for 80-plus years. But Congress wanted to get money out of IRAs sooner rather than later for the tax revenue so the rules changed.

Think of the Black Knight from Monty Python, gravely injured but still doing its best to carry on. Congress wounded the stretch IRA, but they didn’t kill it. What survived is the eligible designated beneficiary, or eligible humans, and there are 5 categories still allowed to stretch. Some we go through wicked quick. Others send us down little rabbit holes.

We dig into stretch IRA eligibility questions like does the IRS accept common-law marriage? Do stepchildren and foster children count as a minor child? And why can one day before an 18th birthday change how disability is defined? Then there’s the question of how a beneficiary proves they’re disabled or chronically ill. The IRS waived some of the certification requirements, but it didn’t treat IRAs and employer plans the same way. I don’t get why that is, but I share Ed Slott’s theory on it.

The post Stretch IRA Eligibility: EDU #2641 appeared first on The Retirement and IRA Show.

Jim and Chris discuss listener emails on Social Security first check timing at age 70 and child-in-care spousal benefits, additional milestone ages and HSA contribution PSAs, Roth withdrawals under the Rule of 55, and finding annuity providers with good customer service.

(11:30) A listener asks whether Social Security benefits started in the month of a 70th birthday should arrive the following month, or only after the first full month at age 70, as the Social Security Administration explained.

(19:45) The guys field a question on whether a spouse can collect a child-in-care spousal benefit for caring for a stepson who became disabled at 21 and receives Supplemental Security Income.

(27:30) Jim and Chris share a PSA that 120 is a milestone age worth noting, since that is when the life expectancy factor used for most RMDs stops decreasing each year.

(34:30) Georgette notes that each spouse’s $1,000 HSA catch-up contribution must go into their own HSA and wonders whether Roth withdrawals of growth qualify under the Rule of 55 or must wait until 59½.

(43:15) The guys share another PSA pointing out that Rule 72(t), which allows penalty-free IRA withdrawals before 59½, is another milestone worth adding to the recent Retirement Milestone Ages episode.

(49:15) A fellow CFP® clarifies that Medicare enrollment, not age, ends HSA contribution eligibility, so someone working past 65 without Medicare can keep contributing, including the $1,000. catch-up.

(58:15) Jim and Chris address whether any annuity providers offer solid customer service.

The post Social Security, Milestone Ages, HSAs, Roth Withdrawals, Annuity Providers: Q&A #2641 appeared first on The Retirement and IRA Show.

Chris’s Summary: 

With Jim traveling, I’m joined by the newest member of the Jim Saulnier & Associates team, Tom Stivers, to review an email from a listener couple who both chose a single life pension, with term life insurance on the higher earner. Their situation raises concerns about Social Security claiming ages, their Minimum Dignity Floor catching up to income if their pensions lack a cost-of-living adjustment, health insurance before Medicare, Roth conversions, and a potential need for a long-term care plan.

Jim’s “Pithy” Summary: 

While I’m traveling, Chris brings in Tom Stivers, a newer member of our team, to work through a longer listener email that doesn’t fit a Q&A show. George and Georgette both took their state education pensions without a survivor benefit. George has the bigger pension, so he bought a term life policy to age 78 to help replace his income if he dies first. Chris admits the hair went up on the back of his neck the moment he saw a single life pension, and it went up again at the word “term”. Tom zeroes in on that word too, because almost none of us know the date we’re going to die. But the rest of the email does change the picture.

They believe they might be unicorns, and with $191,000 of secure income once George claims Social Security at 70, against $110,000 of spending, you can see why. Chris pictures it as a race: income starts way out ahead, but spending keeps slowly catching up, and their pensions likely have no automatic cost of living adjustment. Tom also spots a sneaky line about Georgette’s health insurance before Medicare. George thinks Roth conversions matter for taxes and IRMAA. Georgette isn’t worried and doesn’t want to pay the taxes now. And when Chris asks whether conversions should stop once Social Security starts, Tom answers with a question: what’s your 2-1-0 Tax Ordering Number?

And then there’s what the email never mentions: a long-term care plan. Chris explains why their savings may not stretch as far as it sounds if one of them needs care, and why secure income that continues for the survivor can matter. He points out people can obsess over decisions that barely move the needle while missing the ones that do.

The post Single Life Pension Tradeoffs: EDU #2640 appeared first on The Retirement and IRA Show.

Jim and Chris discuss listener emails, beginning with a listener PSA on HSA catch-up contributions at age 55, then cover Social Security spousal benefits when claiming before full retirement age, paying IRMAA with HSA funds and the SSA-44 form for IRMAA appeals, whether a Roth conversion counts as a 60-day rollover, and annuity timing as interest rates fall.

(6:45) A listener shares a PSA noting that HSA holders age 55 and older can contribute an extra $1,000 per year until they reach Medicare age, and a spouse can do the same in their own HSA.

(22:00) The guys get a question on whether claiming Social Security at 65 still allows a spousal benefit of half their spouse’s higher benefit, or whether that requires waiting until full retirement age.

(27:15) Georgette asks whether IRMAA surcharges can be paid with HSA funds, following a prior episode’s mention that Medicare Part B and D premiums qualify.

(32:30) A listener seeking IRMAA relief after a spouse’s retirement payout wants to know which year belongs in section 2 of the SSA-44 form.

(45:00) Jim and Chris are asked whether a Roth conversion is treated as a 60-day rollover subject to the once-per-365-days limit.

(1:05:45) A listener who has attended several annuity sales presentations wonders why Jim doesn’t buy his planned annuity now and turn on the income later if payout rates are likely to keep dropping.

The post HSA Catch-up PSA, Social Security, IRMAA, Roth Conversion, Annuity Timing: QA #2640 appeared first on The Retirement and IRA Show.

If you would prefer not to learn about Jim’s upcoming drive to Ohio and the family change of plans also sending him to Massachusetts, you can skip to (10:00).

Chris’s Summary

Jim and I walk through retirement milestone ages, from age 21, when a minor child beneficiary’s stretch gives way to the 10-year rule, through catch-up contributions, penalty-free withdrawal ages, Social Security survivor and retirement claiming ages, the IRMAA lookback at 63, Medicare at 65, QCDs at 70½, and RMDs at 73 or 75. We also cover an obscure age 75 RMD rule for pre-1987 403(b) contributions and the age 85 limit for starting a QLAC.

Jim’s “Pithy” Summary

Chris and I work through a list of retirement milestone ages I’ve been holding onto for a while, and the first stop, age 21, is a deep one. Folks, the stretch IRA is the Black Knight from Monty Python and the Holy Grail. It’s gravely wounded, but it’s not gone. A minor child of the deceased IRA owner, an eligible designated beneficiary, or as I call it, an eligible human, can still stretch until 21. Then the 10-year rule applies, and Chris and I guessed wrong on what happens next. I checked with the Ed Slott Group, and the answer comes down to one phrase: at least as rapidly.

Then we hit catch-up contributions at 50, including a new Roth rule this year that some listeners call a loophole. I don’t. We cover the carve-out that lets public safety employees skip the 10% early withdrawal penalty at 50, and the rule of 55, including a strategy the IRS has implicitly blessed. And then there’s the super catch-up. Folks, I have no idea what Congress was thinking. An extra $3,250 a year in your 60s is not going to fix anybody’s retirement. Let people in their 20s and 30s put more in, where it can compound. Chris brings in the Social Security and IRMAA ages, including a disabled surviving spouse rule that taught both of us something new.

At 70½, QCDs can help at the margins when a big RMD threatens an IRMAA tier. I make Chris guess an obscure age 75 rule tied to 403s, and he earns a B+. Then he pulls out one I totally missed at 85: QLACs. I give Treasury credit here, not Congress, and I explain why we’re a little softer on QLACs than on other deferred income annuities.

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