When you get closer to the age of required minimum distributions, you may wonder what you need to do now to prepare. David answers two questions from the mailbag in this week’s podcast.
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Ron is 66 years old and his wife is 65. They have IRAs with about $1.3 million but don’t really need money from them now. What should they do now to reduce their future tax bill before they have to take out required minimum distributions (RMD) at 72 years old? David talks through what their tax bracket may look like and how it could be impacted by RMDs.
Currently, the Trump tax cuts are set to revert to the previous tax schedules in 2026. If Congress does nothing, your tax rates are going up. If Congress does do something, it may still go up even more. What could that mean for your money?
One thing you can do now is a series of Roth conversions over the next five years until the year you turn 72. You can size those conversions to determine which tax bracket you want to be in. How much would you be saving yourself in taxes? Once you do a Roth conversion, your IRA will be smaller and therefore your RMDs will be smaller. This means that there are a number of ways you benefit from doing the Roth conversion.
After listening to a recent podcast on estate planning, Terry wants to be sure to avoid probate on behalf of their heirs. To do so, they added their son as a joint owner of their home. But someone suggested that could cause problems. What does David think? David lays out what kind of liability issues this could cause for you if something were to go awry. Instead of listing an heir on your home, name them as a beneficiary with a transfer on death deed.
Do you have a question for David? Be sure to reach out!
Listen to the entire episode or skip ahead using the timestamps below.
[0:26] – It’s the dog days of summer in Kansas City.
[1:48] – This is part one of our mailbag questions.
[2:38] – Mailbag: How can I reduce my future tax bill in retirement?
[6:17] – How can you pay less in taxes before being locked in?
[11:42] – Mailbag: How can we avoid probate on our home?