Do I need to file?  We recommend that all retirees have a tax professional verify whether or not they are required to file. If you are not required to file, we will tell you so and there will be no charge. If you qualify for the Minnesota Property Tax Refund, we will take care of that for you. 

Should I take distributions from my traditional IRA before I turn 72?   Yes, we generally
advise clients to begin distributions when they retire. 4-5% of your total IRA balance is a
good general rule of thumb for annual distribution amounts. After age 72, distributions
are required. (These are called "required minimum distributions" (RMDs).

How does the Roth IRA work?  You may contribute to a Roth IRA only if you have earned
income (wages, self employment income). You may also convert a small part of your
traditional IRA to the Roth, and create a tax free account using this strategy. 

How will my IRA funds be taxed after I die?  A spouse may rollover your retirement funds into their own IRA. A designated beneficiary has 10 years to liquidate your account and pay tax on the amount that tax was deferred on by the original account holder. If your IRA goes into your estate, the estate will generally liquidate the account and pass the income through to the beneficiaries of your estate who will pay tax on their pro-rata share of the account balance.

Do I need to be concerned about estate taxes? Probably not. High net worth individuals 
should schedule a personal consultation for advice in this area. 3M+ Net worth. The estate tax may apply at the state level but not at the federal level.

When should I sign up for Social Security Benefits?  Generally retirement benefits are available as early as age 62. Full benefits are available at your "normal retirement date" - age 65+ depending on when you were born. Taking benefits early results in a significantly reduced benefit amount. Each individual's situation is unique, so there is no rule of thumb here. The decision is based upon availability of employment, health status, financial status, and life
expectancy. Married folks should learn about how their spouses social security account interacts with their own earnings record.

I have retired and now find that I want to work part time. What are the tax implications?
Again, this is a very individual situation. Social Security has an earnings limit (on earned income only) if you draw your benefits prior to your normal retirement date.  Generally, a small amount of earnings (less than about $18,960 for 2021) will not require you to pay back part of your SS benefits. Once you reach your Full Retirement Age (66 or 67 in most cases), you can earn more than this limit without having to pay back any of your benefits. Depending on your other income, the earned income and social security benefits may or may not be taxable. You may qualify to put some of your earnings into a traditional or Roth IRA. 

I'm concerned about Long Term Care Costs and I don't know where to turn?  Talk to your insurance agent about Long Term Care Insurance. If you can't afford it, rest easy knowing there are less expensive options like home health care. The worst case scenario that everyone hears about doesn't materialize in the vast majority of cases.

Should I sign my house over to my children while I am still alive?   (No.) This type of a legal move has negative tax implications. Consult with your attorney and ask us for the tax angle to this before making a final decision. My general (not legal) advice is to retain ownership of your home.

What are the the tax consequences of selling my home?  IRC Sec 121 provides for an exclusion from income of the capital gain on the sale of a principal residence when occupied for 2 out of the past 5 years. If you have any unusual circumstance, please be sure to contact me for further information. A single taxpayer may exclude up to $250,000 in gain from income. The exclusion is $500,000 for a married couple.

I'm thinking about creating a trust because I'm concerned about probate.  For most seniors, a trust does not offer tax advantages. Probate is the orderly distribution of your estate after you are gone. Get the answers you need from your attorney. Stay away from the showman who pass through town and quickly disappear after the check clears. If you think probate is complicated, wait until you learn about trusts! Most folks should not have a trust in my opinion. And most folks can now avoid probate entirely but setting up a simple estate plan with their attorney.

I lost my spouse during the year. How will this affect my taxes?  A final joint return is filed indicating the date of death. The surviving spouse should get advice regarding what can be significant tax changes as a single filer in subsequent years. 

How much of my retirement money should I have in the stock market? This of course is the "perennial $64,000 question", one we cannot give you the answer to. We don't know how stocks (and other "risk" assets) will perform relative to safe accounts in the bank. Here is a rule of thumb you can use to assess your risk level - take 90 and subtract your age.  We recommend that you not have more than this percentage of your assets in equities and corporate bonds. The remaining percentage should be in Certificates of Deposit, insured bank accounts, U.S. Government Securities, and fixed annuities (not variable) with A+ rated insurers.

For example, if you are 62, this rule of thumb would suggest that you not have more than 28% of your financial assets in stocks and corporate bonds. Do not include real estate in the calculation.

Rules of Thumb like this one do not work for everyone, nor do they guarantee optimal results. In this case, it can be used to assess your financial position which you may wish to tweak based upon personal risk tolerance and financial situation.

The Golden Years