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Frequently Asked Questions



How do RMDs work?

In the year you turn age 72 (and every year thereafter) you are required to take a percentage of your money out of IRAs or other pretax accounts (and therefore pay taxes on the distributed amount). This amount is calculated based on the December 31st value of your account from the year PRIOR to the RMD being due. i.e. 2021 RMD amounts were calculated based on balances on 12/31/2020.

Can I retire today?

Yes, but it may not be in the fashion you desire. Let's see if "want to" and "it works" are possible.

What is the difference between a Roth IRA and Traditional IRA?

Both are Individual Retirement Accounts (IRA), but they differ in the way you receive the tax benefits associated with each account. Any contributions made to an IRA are tax free in the year they are made. This allows you to invest part of your income "pre-tax" and it will continue to grow without being taxed until the money is withdrawn at a later date. A Roth IRA is the opposite. Any contributions must come from money that is being taxed (or already has been taxed), but any growth accrues tax free, and any future withdrawals are also tax free. There are many other differences, but this is the main one.

How is the cost of my Medicare determined?

The cost of Medicare is determined by the government, but depending on what part of Medicare you're talking about, there are other factors as well. Part A is the part you've already paid for out of your payroll taxes, so there isn't an annual premium associated with Part A coverage. Part B is paid for by an annual premium. To determine what your annual premium will be, the government takes a look two years back at your income, and matches that with the particular premium associated with that level of income. In general, there's a higher premium (for those with high incomes), and a lower premium (for those with lower incomes). For part's C and D, you must shop around for yourself, and the price can vary wildly depending on the level of benefits you elect.

How is my RMD calculated?

Your RMD is calculated by taking the December 31st (the year before the RMD is due) balance of your pre-tax retirement account, and dividing it by a factor determined based on your age (and set by the IRS). Here's a resource to see the calculations: https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf

What impact to my Social Security is there if I wait to take it until 70?

It gets bigger! Every year you wait to take social security up to age 70 increases the annual benefit you can expect to receive.

My pension plan has an income-for-life option what does that mean?

Usually this means your pension plan is offering you a set annual payout (that may or may not increase with cost of living) every year for the rest of your life. For specific details, we'd have to consult with the plan directly.

Is there a tax impact if a choose the lump sum option on my pension plan?

Yes, if the pension was funded with pre-tax contributions. Taking the money out in a lump sum vs over the course of many years represents two different tax scenarios. However, if you choose to roll your pension funds into an IRA, this may be avoided. This may or may not be an option, depending on the type of pension plan you have.

Do I need a Medicare supplement?

You may not, but it's a good idea to look into it anyway. A Medicare Supplement plan can cover health expenses that the basic Medicare plans do not. It's always a good idea to get a sense of what's out there so you can make the best choice for your situation.

Why do I need a financial advisor?

Think of your financial health in the same way you think of your physical health. It's possible to manage both on your own, but we still need doctors to help keep us in top shape, or get us back on track when things go wrong. Making a long term plan is possible without an advisor, but our years of experience and our top notch service make us great at doing that for you. With so much going on in your life, we take away the stress from your finances, and leave you to do the things you really want to be doing.

Am I making a mistake leaving my money in CDs, my Savings account, my Checking account?

It depends on what you'd like your money to do. If you're looking for competitive growth on your money, then the low rates of today's CDs and Savings accounts may not be enough. If you are looking for stability, they can be great options. The only way to know for sure is to sit down with your advisor and talk about what you want from your money.

Are annuities the right or wrong solution for me?

Annuities can be incredibly useful tools to generate a stream of income that never goes away, but they are not right for everyone. As with any insurance product, making sure the terms fit your plans and lifestyle is key, and we can only do that on an individual basis.

How do I withdraw money from my account?

Easy! Just give us a call and tell us what you need. We'll handle all the details like tax withholding, direct deposit, and Required Minimum Distributions.