In this episode of Retirement Made Easy, I answer YOUR pressing questions. Over the last month, a variety of questions have been rolling in about social security, retirement, inheritances, and more. So with their permission, I’m sharing their questions—along with my best answer to them. As always, double-check my answers against whoever it is your family trusts for prudent financial advice before making any decisions.

You will want to hear this episode if you are interested in...

• [0:12] We answer listener questions in this episode!
• [2:15] Question #1: What do I do when I inherit an IRA?
• [8:47] Question #2: Can I gift IRA money to my children?
• [10:34] Question #3: How do Social Security survivor benefits work?
• [12:16] Question #4: Are annuities good or bad?
• [16:03] Question #5: How do social security spousal benefits work?

What do I do when I inherit a non-spousal IRA?

A 57-year-old listener recently inherited an IRA from his father, who passed away in January of 2020. He doesn’t want to pay a 10% penalty for early withdrawal. So what are his options? 

The IRS breaks the rules of inheritance into two different categories: spousal and non-spousal. If your spouse passes away, their IRA can get moved into yours—but that only applies to spouses. You cannot do that if you’re inheriting a non-spousal IRA. 

Your fathers’ IRA has to stay separate as a beneficiary or an inherited IRA. The good news? There is NO 10% early withdrawal penalty. It does not apply. The SECURE Act that was passed in 2019 has more details on a big provision regarding inherited IRAs. New rules regarding required minimum distributions (RMDs) apply if you inherit an IRA from someone who passed away after January 1st, 2020.

The way the rules used to work: You could stretch that IRA out and every year you would take RMDs or you can take them out of a 5-year timespan. Now, the rules are totally different. Now you have up to 10 years to take withdrawals from that account. After the 10 years, all of the money has to be out and the taxes have to be paid. 

So what are the listener’s options for withdrawals? What can he do with the inheritance? Listen to find out!

Can you gift IRA money to your children?

Another listener is wondering if he can give part of an IRA to his children. Here’s my answer:

IRAs and Roth IRAs are retirement accounts, more specifically, “Individual Retirement Accounts.” They’re based on your social security number, which is why you can’t have a joint account with a spouse. You cannot gift retirement accounts to your children while you’re still alive. If you want to give them money now, you’d have to withdraw it from your Roth IRA tax-free assuming two things: that it’s been open 5 years or more, and that you’re older than 59 ½. There are gift-tax rules and the annual exclusion in 2020 is $15,000

I answer a question about social security benefits and weigh in on whether or not annuities are good or bad—so keep listening!

How do social security spousal benefits work?

Another listener (who is 72) started taking his RMD of social security at age 70. When the benefits kicked in, he received $3,000 per month. His wife is 64 and her social security benefit is very low. How do spousal social security benefits work?

When you turn full retirement age (age 66) you can get your full retirement benefit OR up to half of your spouses—whichever is greater. A spousal benefit will max out at full retirement age. So it’s not half of what he got at age 70—she’ll get half of what his benefit was when he hit 66 (approximately $1,136 a month). There’s no advantage to waiting until she’s 70 to start taking her RMDs. Instead, look into taking advantage of her spousal benefit as soon as she reaches full retirement age. 

Resources & People Mentioned

• What is an annuity?
• The SECURE Act

Connect With Gregg Gonzalez

• Email at: [email protected]
• Podcast: https://RetirementMadeEasyPodcast.com
• Website: https://StLouisFinancialAdvisor.com
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