Helping people intentionally design their wealth in a way that shapes their most inspired life.
The Wealth Transfer: financial literacy and family values
It can be difficult to not only know when to start talking about money with your heirs but how to instill your principles into the conversation. How will you help them understand this is more about passing on a legacy than money? Will your family understand the importance of charitable giving as much as you do? We’ve compiled some ideas to help you prepare for the most important wealth transfer topics with your family – before your generous gifting begins. Click here to find out more.
WHAT YOU’LL FIND INSIDE:
- THE WEALTH TRANSFER
- 4th ANNUAL FOOD DRIVE
- IMPORTANT DATES
- CLIENT SPOTLIGHT
- WHEN MARKETS ARE DOWN, WHAT SHOULD YOU DO ABOUT RMDs?
4th Annual Food Drive
Paramount Wealth is supporting the Jackson Community Food Pantry again this holiday season with our 4th annual Food Drive.
Bring non-perishable items to our office at 420 South Brown Street in Jackson between November 28 – December 2.
Paramount Wealth will double your efforts by matching the total non-perishable donations that are dropped off at our office.
“We make a living by what we get. We make a life by what we give.” Winston Churchill
Medicare Annual Election Period begins
Deadline to file and pay your 2021 personal income tax return if you received an extension
Deadline to make a 2021 contribution to a Keogh, SEP or other eligible plan if you get a filing extension
Client Spotlight – Lauren Dunigan & Jill McEldowney
In addition to speaking in schools and educating the community, Andy’s Angels also supports Andy’s Place Apartments, a 50 unit complex on Michigan Avenue where individuals who are part of the Michigan Drug Court System can apply to live. Here, they receive onsite services including a recovery program funded and managed by the Drug Court, and life skills programs such as financial health, employment classes, and sober and wellness activities. The facility is currently at full capacity.
Each year Andy’s Angels has a benefit dinner to raise funds for the non-profit. Lauren and Jill take an active role in planning and executing the annual benefit. They help with promoting the event, collecting donations that are raffled or auctioned, help with ticket sales, and setting up the event. This year’s event was held on September 17th at the Country Club of Jackson and raised just over $25,000. Paramount Wealth Management had the privilege to donate 4 tickets for the Michigan v Penn State football game that were auctioned off at the event.
Money raised at this event has been used in part to benefit those residing at Andy’s Place. For example, they were able to purchase outdoor furniture and grills for community areas, an outdoor play structure and lawn games for resident’s families, and several social events such as a Cedar Point trip, Karaoke night, holiday cookouts, and other community gatherings.
When Markets Are Down, What Should You Do About RMDs?
Volatile markets add a layer of complexity to taking these distributions, however. As the RMD amount is determined by the retirement account’s value at prior year-end as well as your life expectancy, a quick downturn in the stock market at the beginning of the year can cause a lot of stress for individuals who are then required to take a distribution – and who face a steep 50% penalty if they don’t. It’s not a simple topic. However, there are a few considerations and strategies to bear in mind when thinking about your RMDs amid volatile market conditions.
If this is your first RMD, you have the option to delay
Normally, RMDs must be taken by December 31. However, your first RMD can be delayed until April 1 of the year after you reach the relevant RMD age (72 if you were born after June 30, 1949; 70½ if born earlier). Those extra months can provide a bit of flexibility in timing, allowing for market conditions to potentially stabilize or improve before you take a withdrawal from the account in question.
However, keep in mind that if you delay your first RMD into the year after reaching your age trigger, you’ll still need to satisfy that year’s RMD before December 31 – meaning you’ll be taking two distributions within the same calendar year. This means more taxable income, which may push you into a higher marginal tax bracket or increase certain costs such as Medicare premiums.
Bottom line: a bit of flexibility in timing can be a positive, but be sure you’ve thought through the tax implications.
If you’re still working, you may have the option to delay
If you’ve reached the age of taking RMDs but are still working, you may be able to defer taking the RMD from your current employer’s retirement account. The IRS generally allows your first RMD from an employer’s retirement plan – such as a 401(k), 403(b) or profit-sharing plan – to be taken by April 1 in the year after you retire, provided that your company allows you to delay past normal RMD age and you own less than 5% of the business.
Much like the first RMD-delay option noted above, you’ll want to think through how taking two RMDs in the next calendar year might affect your tax situation.
Different accounts have different rules
If you have multiple individual retirement accounts (IRAs), you have the option to withdraw the total RMD amount owed for all of your IRAs from one or more of them, rather than taking out each RMD from its specific account. A similar rule applies with 403(b) accounts. However, RMDs from other types of retirement plans like 401(k) and 457(b) plans have to be taken separately from each account. Talk to your financial professional to determine where you have location flexibility and where you don’t.
Use cash, if available
If you’re already holding cash in an account you have to withdraw from, take advantage of it. Instead of selling investments at reduced values, simply request the cash out of the account to satisfy the RMD.
If there’s not enough cash, sell thoughtfully
Hopefully, you have an appropriate asset allocation that has a mix of asset types – including stocks and bonds – tailored to your individual risk tolerance. If that’s the case, you and your financial advisor can discuss which assets would be best to sell to satisfy the RMD amount, hopefully avoiding locking in losses on positions that have suffered the worst.
For the charitably minded, QCDs are an option
If you don’t need the income yourself and have a cause close to your heart, you can take a qualified charitable distribution (QCD), which allows you to donate up to $100,000 to charity from your IRA and have it count toward your RMD. This strategy won’t help if you need to sell investments to raise cash, but it will help on taxes, as the gift won’t be included in your taxable income (even though it fulfills your RMD).
If you don’t need the income, consider an in-kind distribution
Another option if you don’t need the cash flow – an “in-kind distribution.” This involves requesting that securities in your IRA be transferred to your after-tax brokerage account – which is particularly beneficial if you’re holding a position you don’t want to sell. This strategy doesn’t avoid taxes on the RMD, but it can help reduce transaction costs (since nothing is being sold or repurchased) while maintaining your position in the security at all times. Bear in mind that an in-kind IRA distribution will reset the cost basis of your holding.
Remember, you can reinvest
Regardless of which strategy you decide to use, keep in mind that you can choose to reinvest any money you withdrew to satisfy RMDs by moving it to an after-tax brokerage account. This can help provide an opportunity for that money to grow if markets recover. If you’re already happy with your specific holdings, however, consider the in-kind distribution strategy mentioned above.
Turn to a professional for tailored guidance
Everyone’s situation is unique, and there are nuanced strategies for satisfying RMDs that go beyond the approaches covered here. Your tax professional and financial advisor are the best sources for information that’s personalized to your specific situation and future goals.
Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation.
Don Hershberger, CFP®, AIF®, CRC®, Founder and President, PWM, was named on the 2022 Forbes Best-in-State Wealth Advisor list.
Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Paramount Wealth Management is not a registered broker/dealer and is independent of Raymond James Financial Services.
The Forbes ranking of Best-In-State Wealth Advisors, developed by SHOOK Research, is based on an algorithm of qualitative criteria, mostly gained through telephone and in-person due diligence interviews, and quantitative data. Those advisors that are considered have a minimum of seven years of experience, and the algorithm weights factors like revenue trends, assets under management, compliance records, industry experience and those that encompass best practices in their practices and approach to working with clients. Portfolio performance is not a criteria due to varying client objectives and lack of audited data. Out of approximately 34,925 nominations, more than 6,550 advisors received the award. This ranking is not indicative of an advisor’s future performance, is not an endorsement, and may not be representative of individual clients’ experience. Neither Raymond James nor any of its Financial Advisors or RIA firms pay a fee in exchange for this award/rating. Raymond James is not affiliated with Forbes or Shook Research, LLC. Please visit https://www.forbes.com/best-in-state-wealth-advisors for more info.
Any opinions are those of the author and are not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. All opinions are as of this date and are subject to change without notice. All opinions are as of this date and are subject to change without notice.
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