Financial Q&A

I am turning 70 ½ this year. How much must I take out of my IRA?

The required minimum distribution (MRD) must be taken each year beginning with the year you turn 70 ½.  The RMD for each year is calculated by dividing the IRA account balance as of December 31 of the prior year by the applicable distribution period of life expectancy.  This rule does not apply to Roth IRAs. Source – www.irs.gov

If I am still working do I still have to take my required minimum distribution?

Both business owners and employees over age 70½ must take required minimum distributions form a SEP-IRA or SIMPLE-IRA. There is no exception for non-owners who have not retired. Source – www.irs.gov

My neighbor says he believes in the security of annuity investments. What is an annuity?

An annuity is an insurance product that can help you save for retirement.  You can get guaranteed income for life from an annuity.  This income can help you reduce the risk that you will outlive your savings.  Deferred annuities can offer investment portfolios or they can provide a fixed interest rate to help build your savings.  Source – www.irs.gov 

I started receiving Social Security payments last year.  My only other income is from my company retirement and some interest and I pay federal taxes on this income. Will I have to pay any taxes on the income I receive from Social Security?

Some of the Social Security benefits may be taxed.  It all depends on your other income and filing status. Social Security only becomes taxable when half of your benefits are added to other gross income and tat total exceeds an amount determined by your filing status.  For example, the amount for married filing jointly is $32,000 and for single tax payers it is $25,000.  Use the Social Security worksheet in your tax booklet to calculate the taxable amount if any.  source - www.aarp.org

What is the annual federal gift tax exclusion amount for 2016?

It remains unchanged at $14,000 per person.

My IRA custodian says I need to name a beneficiary for my retirement account. What is the difference between Primary and Contingent beneficiaries?

Primary beneficiaries receive the proceeds of the life insurance policy or retirement account when you pass away.  Contingent beneficiaries are secondary beneficiaries – they will only receive the proceeds when there are no surviving primary beneficiaries.

Can I name more than one beneficiary as a primary beneficiary?

Yes, you can name more than one beneficiary. In this case you must specify a percentage for each of your beneficiaries to share the benefit and the total must equal 100%.  

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