When it comes to your hard-earned savings, you could be leaving your family a huge burden when you pass, and you might not even know it. So, what can you do?
Anna Christine from the retirement planning firm Golden Reserve appeared on “Live In The D” to share some advice. She explained that taxes can complicate family finances in retirement.
Christine talked about what can happen when someone retires with IRAs and 401Ks, but doesn’t start drawing it out.
“Growth is always a good thing, but that’s essentially a joint account with Uncle Sam, so it means that as it grows, that’s a bigger tax liability,” Christine said.
“If you just wait until you’re 73 and you only take out that requirement minimum distribution, you’re walking into two penalties that Uncle Sam has laid out for you,” Christine said. She explained that one is the widow’s penalty and the other is the kiddo’s penalty.
First, Christine explained the widow’s penalty. She said that when someone is married they are filing at the joint filer rate, which is usually lower, but when one spouse passes away they are then at the single filer rate, which means they might end up paying double in taxes.
Next, Christine talked about the kiddo’s penalty. When both parents pass away and that money passes onto the kids, the kids now pay at their income tax rates, she explained. If they’re working, that could be 35 percent or even more, she said.
Christine stressed that it’s important to have your own tax plan. She mentioned that Golden Reserve has a team that can show you when and how to take money out of IRAs and 401Ks so that you don’t run into the widow’s and kiddo’s penalties.
Watch the video above or click here for more information about Golden Reserve.