SafeMoney 6-8-24

Episode Transcript

(00:00):
Good Saturday morning to all on thisearly June weekend, twenty twenty four.
Dick Hildegare and this is Safe Money. We have been on WC for lots
of years now talking with you,our listeners, about various topics that impact
you who are either in retirement orapproaching those retirement years. The last several

(00:25):
Safe Money programs, we discussed longterm care and the costs of long term
care as a real threat to ourretirement assets. Prior to that, we
discussed for several weeks the social Securitysystem and challenges social security faces in the
coming years. Today, I wantto talk about a new topic, and

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that topic is required minimum distributions andtheir threat to our retirement resources. Before
moving on, though, I wantto remind all that we continue our virtual
monthly community meetings. You probably recallwe used to provide these meetings monthly in

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person. We will go to aconvenient meeting room somewhere in the Quad Cities,
usually at a hotel or other easilyaccessible meeting room, and utilize that
meeting room several times monthly to discusstopics of importance to retirees or persons who
are near retirement. When the COVIDepidemic hit a couple of years ago,

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and it was not recommended hosting anin person meeting, so we began using
the Internet and began broadcasting our virtualcommunity meetings via the Internet. Participants in
those meetings stayed in their own homeuse their own computer equipment to participate in
these meetings. We found that usingthis more convenient method of present psentation was

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more accommodating to our participants and wealways ended up with greater participation using this
method. So our June monthly Communitymeetings will be held on Tuesday, June
eighteenth and Thursday June twentieth at teno'clock in the morning. Remember these are

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virtual community meetings, so you stayin the privacy of your own home use
your own home computer equipment to participate. On Tuesday, June eighteenth, we
talk about the basics of Medicare andthen focus on the Medicare supplement plans.
Then two days later, on ThursdayJune twenty, June twentieth, we again

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begin talking about the basics of Medicareand then focus on the alternative to original
Medicare. And the alternative is theadvantage plans, and in particular what we
believe is the more competitive of theadvantage plans and these Medicare regions, and

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that is the United Healthcare and Medicareadvantage Plan. So if you'd like to
have more information about that advantage plan, feel free to give us a call
or call us at call us atfive sixty three three three two twenty two
hundred, or go to my website. Go to Dickshilling dot com and scroll

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over to the contact icon and openthat for our email address, And if
you'd like to send me a notevia email, feel free to do so.
Okay again my phone number five sixtythree three three to two twenty two
hundred or email Go to Dickshilling dotcom and scroll over to the contact icon

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and drop down are that icon ourfor our email address. This morning,
i'd like to focus on our MD'srequired minimum distributions. Now we have this
information in newsletter form two. Soif you'd like to have a written copy

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of this r MD information that weshare with you this morning, please give
me a call or email me andI'll be happy to send that to you.
What are our m d's required minimumdistributions? They are often referred to

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as our minimum required distribution, andthat's amounts that the federal government requires us
to withdraw annually from traditional iras andemployer sponsored retirement plans after we reach age
seventy three. Now it's a fourto age seventy five for those who reach

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age seventy three after December thirty first, twenty thirty two. So that's the
ways in the future. So youcan always rethrow. You can always withdraw
more than the minimum amount from yourir or plan in any year, but

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if you withdraw less than required minimum, you will be subject to a federal
tax penalty. The rm RMD rulesare calculated to spread out the distribution of
your entire interest in an ir orretirement account over your lifetime. The purpose

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of the RMD rule is to ensurethat people don't just accumulate retirement accounts,
defer taxation and these and leave theseretirement funds as an inheritance instead. Required
minimum distributions r mds generally have theeffect of producing taxable income during your lifetime,

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which retirement savings vehicles are subject tothe RMD rules. In addition to
traditional irays, simplified employee pension plans, IRA's and simple iras are subject to
the r MD rules. Wroth iras, however, are not subject to these

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rules while you are alive. Althoughyou are not required to take any distributions
from your wroth irays during your lifetime, your beneficiaries will generally be required to
take distributions from the wroth IRA afteryour death. Employer sponsor retirement counts that

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are subjectory to the RMD's rules andinclude qualified pension plans, qualified stock bonus
plans, qualified profit sharing plans includingfour oh one K plans, Sections four
fifty seven B plans, and Sectionfour O three B plans are generally subject

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to these rules too. If youare uncertain whether the r MD rules apply
to your employer sponsor plan, youcould consult your plan administrator or a tax
professional. When must our mds betaken, Your first required distribution from the

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IRA or retirement plan is for theyear you reach age seventy three age seventy
five those who reach age seventy threeafter December thirty first of twenty thirty two.
However, you have some flexibility asto when you actually take this first

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year distribution. You can taken duringthe year you reach seventy three, or
you can delay it until April firstof the following year. Since this first
distribution generally must be taken no laterthan April first, following the year you
reach age seventy first seventy three,this April first date is known to be

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your required beginning date. Required distributionsfor subsequent years must be taken no later
than December thirty first of each calendaryear until you die or your balance is
reduced to zero. This means thatif you opt to delay your first distribution

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until April versa the following year,you will be required to take two distributions
during that year, your first yearsrequired distribution and your second year's required distribution.
So with the complexity of that issue, listeners, if you are approaching
the age of seventy three and youhave qualified retirement plans which will be impacted

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by these RMD rules, I encourageyou to give us a call to talk
with a tax advisor or your incometax professional. If you choose to do
so, you can call us atfive sixty three three three two twenty two
hundred, or you can send mean email by going to my email address.

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Go to Dickshillick dot com and scrollover to the contact icon and drop
that down for an email address,and if you'd like to correspond in that
manner, please use it. Pleaseuse that system. Your first required distribution
from an IRA or retirement plan isfor the year you reach age seventy three.

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However, you have some flexibility asto when you actually have to take
this first year distribution. You cantake it during the year you reach seventy
two or hope I said that wrong. You can take it during the year
you reach age seventy three, oryou can delay it until April first of

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the following year. Since this firstdistribution must be taken no later than April
first following year you reach age seventythree, this April first date is known
as You're required date. Required distributionsfor subsequent years must be taken no later

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than December thirty first of each yearuntil you die or until the balance in
this account is reduced to zero.This means if you opt to delay your
first distribution until April first of thefollowing year, you will be required to

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take two distributions during that year,your first years required distribution and your second
year's required distribution. The tax incomethe tax income result on that may be
prohibitive so you want to keep thatin mind too, and for that reason
you may want to consult with yourtax professional or gimp us to call at

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five six three three three two twentytwo hundred. I'm going to give you
an example of that. If youhave a traditional IRA when you each when
you reach age seventy three in twentytwenty four, you can take your first
RMD during twenty twenty four, oryou can delay it until April first of

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twenty twenty five. Now, ifyou choose to delay your first distribution until
twenty twenty five, then you willhave to take two required distributions during twenty
twenty five, one for twenty fourand one for twenty five. This is

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because your required distribution for twenty fivecannot be delayed until the following year.
There is one situation in which yourrequired beginning date can be later than that
described here. That if you continueto work past age seventy three and are
still participating in your employer's retirement plan, you're required binning date until the plan

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of your current employer can be aslate as April first following the calendar year
in which you retire. If theretirement plan allows this, and you own
five percent or less in the company. Again, subsequent distributions must be taken

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no later than December thirty first ofeach calendar year. So if you own
more than five percent of the companywhere you work, you will reach age
seventy three and twenty twenty four.You must take your first RMD from your

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current employer's plan by December one,twenty twenty five, even if you are
still working for the company at thattime. That is, if you own
more than five percent of the companywhere you work. Now, if you

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participate in two plans, one withyour current employer and one with your former
employer, and you own less thanfive percent of each company, you will
reach age seventy three in twenty twentyfour, but will keep working until you
turn seventy four in twenty twenty five. Then you can delay your first RMD

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from your current employer's plan until Aprilof twenty twenty six, the April first
following a calendar for which you retire. However, you must take your first
distribution from twenty twenty four from yourformer employer's plan no later than April first,
twenty twenty five, and that's theApril first. After reaching age seventy

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three. So I know that soundscomplicated, and it gets to be complicated.
So when you get to be inthat situation where you're required to take
distributions, I encourage you to talkwith your tax planner or if we can
help, give us a call.Call us at five sixty three three three
two twenty two hundred, or goto my website. Go to Dickshilly dot

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com, scroll over to the contacticon for my email address, and send
me a note via email if you'drather correspond in that manner. How are
our mds calculated? Our mds aregenerally calculated by dividing your traditional IRA or

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your retirement plan account balance by alife expectancy factor specified in IRS tables.
Now, your compounds is generally calculatedas of December thirty, first of the
year preceding the calendar year in whichthe district is required to be made.

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So, if you have a traditionalIRA and you will reach age seventy three
in twenty twenty four, if firstRMD must be taken note later then April
first of twenty twenty five. Butin calculating that RMD to April first of
twenty twenty five, remember you alsomust take an RMD four the year twenty

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twenty five, so that may mayadversely affect your income tactics, so I'd
be careful on that. For mosttaxpayers, calculating our mds is straightforward.
For each calendar year, simply todivide your account balance as of December thirty,

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first of the year prior to yourdistribution period, determine under the uniform
lifetimetable using your attained age in thatcalendar year. This life expectancy table is
based on the assumption that you havedesignated a beneficiary who is exactly ten years

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younger than you are. Every IRAowner and plan participants calculation is based upon
this same assumption. There is oneexception to to this procedure, and that
is the younger spouse rule. Ifyour soul designated beneficiary is your spouse,

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and your spouse is more than tenyears younger than you, then the calculation
of your rmds may be based onthe longer joint and survivor life expectancy of
you and your spouse. Consequently,if your spouse is a designated beneficiary and
is more than ten years younger thanyou, you can take your RMD over

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a longer payout period than under theuniform lifetimetable. If your beneficiary is not
your spouse or a spouse who isnot more than ten years younger than you,
then you must take the shorter payoffperiod based upon the uniform lifetime table.
Now that uniform lifetimetable is readily availableis available on the internet. Go

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to www incometax dot com and scrollover to the section four IRIS or required
minimum distributions and you can obtain thatuniform lifetimetable or simply contact me. I'll

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be happy to send you that tablevia the Internet, via your email,
or I'll just mail it to youdirectly. So remember, if you have
multiple or and RMD is calculated separatelyfor each ir however, you can withdraw

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the required amount from any one ormore of your iras. Inherited iras are
not included with your own for thispurpose, so similar rules apply to Section
four or three B accounts. Ifyou participate in more than one employer retirement
plan, your RMD is calculated separatelyfor each plan and must be paid from

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that plan. Rmds have a significantpart of our financial life and clearly they
are a threat to the safety ofour assets. Another threat to the safety
of our assets is the threat oflong term care costs. Now, for

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the next several weeks on this radioshow, I would like to focus on
long term care costs. I knowthat's something you don't see yourself incurring.
Most of us don't see ourselves havinglong term care costs. But the reality
is there is long term care risk. And we're talking about long term care.

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We're talking about the costs of notjust nursing home, but we're talking
about the cost of assisted living.We're talking about the cost of home health
care, and we're talking about allthose costs together. So if you,
or what if many of us whodon't anticipate us having long term care costs,

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boy, look at the statistics onthat the effects of long term care
are reality and a reality to allof us. So, in addition to
our mds, long long term carecosts are a threat to our financial future.
And so I'd like to spend thenext couple of weeks talking about long

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term care costs and how they impactthe risk to our retirement assets. You
know, I mentioned frequently here onSafe Money that we have those bargraph charts
tracking the history of the stock marketwe track the various indices. We track

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the Dow Jones Industrial Index, thes and P five hundred, and the
SMP index, as well as anASDAC one hundred index. Those bar graph
charts we track for the last twentyseven in a quarter years, So we
go back to the latter part ofthe decade of the nineteen nineties, and

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I use the lotter part of thedecade, the nineteen nineties as a point
to consider, because that is aboutthe time that I was introduced into these
fantastic annuities, the fantastic index annuity, which allows you your account value to

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share in the growth of the stockmarket. Your account value does not share
any of the downturns of the market. So I use that as a measuring
tool, and I go over thosecharts with most of my clients when they
come in. We review them,and most of my clients will remember those

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years. Going back to the latterpart of the decade of the nineteen nineties,
we had those very very strong marketgains and then at the turn of
the century, we had three consecutiveyears two thousand and one in two thousand
and two where we had three consecutiveyears of loss on the market, and

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most people can remember those years.Then in two thousand and three we had
some recovery. But in two thousandand two, thousand and one, two
thousand and two, we had overa thirty percent loss, and then in
two thousand and three we had atwenty one percent gain. So if we

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had a thirty percent loss in theprior years and then the twenty one percent
gain in the following year, ourcon value still shows a loss. So
those are significant. And like Isay, if you would like to have
a copy of those market reports sincethe latter part of the decade of the

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nineteen nineties, just give me acall or email me and I'll be happy
to send you a copy of thosevia email or drop them into mail to
you. When you track those years, I'm sure you'll recall those years and
the impact that those years add onour account value. On a retirement account

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values we track all the years,including the tremendous loss year of two thousand
and eight, when the Dow JonesIndustrial dropped almost thirty three points or thirty
three percent, the Nasdaq Index almostforty percent. The NASDAK one hundred also

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had a loss that year, whichwas very similar and that loss was sixteen
or seventeen percent, and the Sand P five hundred had a loss of
about ten percent. So that's aboutall a half for you this morning.
If you'd like to have a copyof those charts or anything else we got

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into the r mds we spoke ofthis morning, please give me a call.
Call me A three three two twentytwo hundred, that's five six three
three three two twenty two hundred,or go to my website go to Dickshilly
dot com and scroll over to thecontact icon for my email address. Have
a great, great weekend, lookingforward to talking with you next weekend.

(25:29):
Good day,