Estate Planning

Arizona IRA & Retirement Planning

When most people think of the help that the federal government provides in achieving financial security during retirement, they think of Social Security. While it is true that Social Security provides important retirement benefits for seniors, administering and providing for these benefits isn’t the only thing that the government does to help you afford life after you can no longer work. There are many different types of accounts which provide you with tax breaks for investing; and each of these accounts has the effect of the government subsidizing your retirement savings.

You need to know how to take advantage of tax breaks for investing so you can use the help the government is giving you for retirement and so you can put your money to work wisely to achieve financial security.

When (and How) Can You Make a Good Retirement Plan? 

The best time to make a plan for retirement is the day you start working.

If you begin investing from day one, you are going to be able to grow a nest egg by setting aside much smaller amounts of money over a longer period of time.

Compound interest and the magic of sustained investing over many years can make it possible for you to have a comfortable retirement. You may even be able to retire early with enough money that you will enjoy financial security during your golden years.

If your career is already underway or you are getting older, the best time to make a retirement plan is right now.

You don’t want to wait another day to begin making smart investment choices. There is an opportunity cost to not investing for retirement, and you can stop incurring this cost and get on the path to financial security if you work with an experienced attorney today to make your retirement plans.

Starting now to make retirement plans is also important because one of the best things that you can do to save for retirement is to take advantage of tax breaks that the government provides for saving.  The tax advantaged accounts that you can invest in have annual contribution limits. For each year that you miss a contribution, you’ve given up the chance to have the government subsidize your retirement savings.

How Does an IRA Fit into a Solid Retirement Plan? 

One of the smartest ways to jumpstart your savings for retirement is to take advantage of investing in an IRA.

Regardless of your income, you can invest in an IRA and get tax breaks if neither you nor your spouse have a workplace retirement plan.

You may also be able to invest in an IRA and get tax breaks even if one or both of you have workplace retirement plans, provided your income does not exceed maximum limits for single individuals or married couples.  Simple and Self-Employment IRAs also make investing in an IRA possible for business owners and the self -employed, even for those with higher incomes.

Because IRA investing allows you to invest money with pre-tax funds, the government’s subsidization of your retirement savings is equal to whatever your tax bracket is. If you are in the 33 percent tax bracket, for example, then the government  essentially gives you 33 percent off of the money being put into your IRA. This makes it easier to save. 

SECURE Act

The SECURE Act has passed! We believe some clients will be impacted in one of these three ways. Download our free report on Estate Planning with IRAs to read more.

1. The Required Minimum Distribution (RMD) Age was increased from 70 ½ to 72.

2. If you are over the age of 70 ½ and have earned income, you can continue to contribute to your traditional IRA.

3. Lastly, there were changes to eliminate “Stretching” an inherited IRA for non-spouses.

1. The Required Minimum Distribution (RMD) Age was increased from 70 ½ to 72.

This is a positive change and will benefit you if you have a large amount of tax-deferred savings in an IRA. You can now grow your IRA money for another year and a half if you’re not yet in a position where you need to start taking your RMDs.

2. If you are over the age of 70 ½ and have earned income, you can continue to contribute to your traditional IRA.

Before this law, if you were 70 ½ or older, you could not contribute to your traditional IRA like you could with a Roth IRA. Now if you are still working, you may continue to contribute all or some of your earned income to your IRA. This is another positive change!

3. Changes to eliminate “Stretching” an inherited IRA for non-spouses.

Up until this law passed, non-spousal beneficiaries of IRA accounts like children, could typically take distributions from an inherited IRA over their own life expectancy, which means it could have been drawn out over many years depending on how old they were at the time the account was inherited. This strategy was used to reduce the tax burden of receiving a full inheritance during peak earning years (think 45-65-year-old adult children). Receiving a large inheritance during this time could put your heirs into a higher tax bracket, which would ultimately reduce the inheritance they receive from you.

Now, the SECURE Act requires most non-spousal beneficiaries to withdraw 100% of the inherited IRA over a 10-year period. This change would likely only impact IRA heirs that are set to inherit a large amount since smaller IRA amounts are typically used up within 10 years by most.

How can an Arizona Retirement Planning Lawyer Help Me? 

Kinghorn Law | Financial can help you to understand how IRAs can fit into your retirement plan.

Kinghorn Law | Financial can help you to understand how IRAs can fit into your retirement plan and can provide assistance with all aspects of making a comprehensive retirement plan. Speak with an Arizona retirement planning lawyer about how we can help you.