And our phone lines are open for you here at the station six oh eight three two one thirteen ten. That's six oh eight three two one thirteen ten. If you have any questions at all for our retirement planning professionals from Class Financial love to hear from you this morning, anything retirement related to Telful number again here at station six oh eight three two one thirteen ten. That's six
oh eight three two one thirteen ten. Of course, you can learn more about Coss Financial on their website coss financial dot com.
That's coss k.
L aasfinancial dot com. Great website to learn more about Coss Financial. You can also listen back to this or previous shows podcasts as well. That all available to you at coss financial dot com. You canubscribe subscribe right there on the website. Speaking of subscribing, they've also got the weekly Market Pulse newsletter available to you at cossfinancial dot com. Really great website and a great newsletter as well that's
free to you. Speaking of things that they're giving you at Coss Financial, that little weekly newsletter gives you a nice little snapshot of what's been going on in the markets. Also, uh, let you know a link to the most recent podcast, so you never miss it. Against head on over to class finance dot com telephon number for Class Financial six oh eight four four two five six three seven. No charge for that first get to know your appointment at
class Financial. It will be complementary to you. I'm gonna tell number six oh eight four four two five six three seven and joining us this morning for a Class Financial or Nate Briby and Eric Schwartz. Nate, how you doing this morning?
Hey, Sean doing good?
Good to hear from be great to talk with you at Eric, how have you been?
I'm doing great, Son, how are you doing?
I'm doing good.
We've got we've got some fun stuff r mds would be talking about this week, which is a really important, uh really important conversation and it's also a really uh really cool thing for folks to understand how they work. I think there's a lot of a lot of misunderstanding about what required minimum distributions are and how they apply, and we're gonna get the details from Eric and Nate. We will get that in just a moment. Mention the phone lines being open to you. I'd love to hear
from six oh eight three two one thirteen ten. That's six eight three two one thirteen ten the website for Class Financial class financial dot com and they're telph number six, So eight four four two five six three seven. Before we get rolling on this week's conversation with Eric and
Nate about required minimum distributions. One of the cool features of the program is, of course, the Class Quiz Question of the Week, your chance to win a fantastic prize this week, no exception, our friends from Class Financial have provided a twenty five dollars gift card to the cheesecake Factory. We'll tell you a little bit later on the program how you can win that with the Class Quiz Question of the week. Let's actually speaking up the Class Quiz
Question the week. Let's actually look back to last week's show, get the question and answer there as well.
Nate yep, thanks everyone for listening as always, and congrats to our winner from last week, Mark of Fitzburg, who correctly answered the true or false question, which was your beneficiary designations on your investment accounts will will override your will or trust and the correct answer is true.
So definitely important to keep in mind.
Yeah, really important, And that was a great show as well. You can listen back over at coss financial dot com. So you know, when we're talking about future retirement income, I know r m ds they are a big deal.
What if folks need to know about those?
Eric, Yeah, this is what we spend a lot of our time talking to clients about. And honestly, it's a I think a lot of the reason clients approach us to begin with, because not only are these pretty confusing, but they feel like they're constantly changing. But think of think of required minimum distributions or r m ds as well,
we'll call them today. Think of them like the irs saying all right, we've we've allowed you to to uh put dollars into your retirement accounts pre tax uh and and defer tax on those dollars for all of these years. Now it's time that we want you to start taking it out so we can generate some some tax revenue on it. So they're gonna they're gonna make sure that your tax areferred. IRA money doesn't just stay there forever.
And this is something I think that for folks has gotten a little more confusing because you know, they've heard certain ages they hurt seventy and a half, they've heard seventy two, seventy three, seventy five. You know, when does it start? So rm ds have changed in the last probably five years now, I think. And for folks born between January first, nineteen fifty one, in December thirty first, nineteen fifty nine, their rm ds are going to start
at seventy three. And then anybody born after nineteen sixty their rmds are going to begin at seventy five. And I mentioned earlier it used to be seventy and a half, then it was seventy two. The the Secure Act and Secure Act two point zero legislation have pushed back rmds a couple of times here, and I think now for folks it's it's easiest just to think of it as if you're born before December thirty first, nineteen fifty nine, rm ds start at seventy three. Anybody after you're starting
at seventy five. Now, if you miss your rm D there is a penalty. We'll get into the details of that later, but there is a penalty for not taking out your required amount when the time comes. And these distributions are taxable income. Okay, so unless you have after tax contributions in your retirement plans, which are less common these days. You are going to pay income tax on those distributions. Again, that's why the I R S is actually wanting you to take those dollars.
Out, always looking for their money.
Had they won't forget about it, Shohn, I don't worry.
They won't forget about it. They certainly don't.
Talking this morning with Eric Schwartz and Nate Brivey, our retirement planning professionals from Class Financial. If you've got a question for Nate and Eric, love to have you joined us this morning telephone number six oh eight three two one thirteen ten at six oh eight three two one thirteen ten.
So Nate, what kind of accounts are we talking about here?
Yep, So rmds are going to apply to any pre tax retirement accounts, Like Eric said, so think of traditional iras, step irays, simple iras, four oh one k's, four oh three b's, and four fifty seven b's. So most of you may have some of those accounts infully those names ring a bell for you. There is one key exception that if you are in past age seventy three, you don't need to take r and ds from your company
sponsored retirement plan if you're still employed with them. Now, I do believe you actually have to be working through the full year. So it's not like you can say, well, I work New Year's Day and then I don't have.
To take it for the whole year.
I'm you know, Eric, you can correct me if I'm wrong, but I'm pretty certain you.
Have to work through the whole year to get that exception. So true.
Notice one important point in that simple and set plans are do not fall under that exception. So if you have a simple plan, your simpler set plan that you're self employed, and you say, well, I'm seventy three and I'm still doing electrical work, it's like, well, I'm sorry, it's a simple IRA and unfortunately not qualify for that
I'm working past age seventy three exemption there. So, of course, notably excluded from this list is ROTH accounts, so Roth iras are made with you know, after tax contributions tax regrowth, so there are no required.
Minimum distributions on those while you're living.
I think Eric has a section on about inherited rm ds, which are a whole nother ball of wax, but for the original contributor to ROTH iras there is no required minimum distributions, which is great.
Really, there was a wonky, a wonky.
Nuance in the tax code where actually Roth four oh one k's required.
A minimum distribution, which is wonky.
But actually starting last year in twenty four that they got rid of that requirement. So Roth four oh one k's do not require a minimum distribution at this point.
It's all that's stuff. I find that stuff so interesting. You mentioned, you know that they made that change back in twenty twenty four. I remember when we were doing shows previous to that change is always like what is that all about? And that's, you know, one of those one of those very fascinating things like how did that get forgotten? Of course, eventually kind of figure everything out
and level it all out as well. As we talked this morning with Eric Schwartz today Briby retirement planning professionals from Class Financial talking this week about required minimum distributions. If you have a question, whether it's about required minimum distributions or anything as far as your retirement planning, left to get you on the air with our retirement planning professionals from Coss Financial, All I gotta do is dial in here to the station six soh eight three two
one thirteen ten. That's six oh eight three two one thirteen ten. Of course, you can learn more about COSS Financial on their website coss financial dot com that's Coss k l aas Financial dot com and their telephone number six oh eight four four two five six three seven. No charge for that initial gets to know you appoyment at COLSS Financial. It will be complementary to you again that number six oh eight four four two five six
three seven. So how do you figure out and how do they figure out what those RMD amounts are each year? And what if you slip up and maybe a miss one?
Sure, this is a simple two party equation. So you start with your previous year ends balance divided.
By your life expectancy factor.
So if you're turning seventy three this year, you would take your twelve thirty one of twenty twenty four IRA balance and divide it by a factor that will get a number here, a factor that we'll getting tier in a second. But most individuals will use the uniform life table to find your life expectancy. This factor will decrease every year, and all else being equal results in a higher RMD going forward. Now it should be hopefully be obvious, but you will have a different RMD amount every year.
So an example would be someone turning seventy three. Their life expectancy factor is twenty six point five years. So on one hundred thousand dollars account, you need to take out about three thousand, seven hundred and seventy four dollars.
So for US math.
Wizards, that's about three point seventy eight percent if you want to think about it that way. Rmds are calculated per IRA, so if you have three, you'll have three separate rmds. But now you can aggregate that total amount and distribute it from one single IRA IRA. But notably, this is only for iras. Once again another new liance, So four one k is or three b's four to fifty seven plans must be taken from each company's separate plan, so that's something to be aware of. Now another special note,
because there's not enough already. If your spouse is the sole beneficiary of your IRA or retirement.
Account and they are more than ten years younger.
Than you, you actually get to use a different table called the joint life expectancy table to calculate your life expectancy, and once again, all else being equal, this will result in a slightly smaller RMD to account for a younger spouse potentially inheriting the money down the road. Now, you can delay your first RMD to what's called your required beginning date, which is April first of the year after
you reach age seventy three or seventy five. But if you do that, you would actually be doubling up and having two years worth of minimums distributed.
In the same tax here.
Right, So if I take my defer my first year's RMB til next year in twenty six, I take twenty five's minimum in twenty six plus twenty twenty six minimums in that same calendar year as well, if you follow me there. So generally we don't recommend that, but just that's kind of a whoops, you shoe it.
I forgot about the first time.
They kind of give your grace period that for that first quarter of the following year there. But as we said, missing an R and D is kind of a big deal. Now they have dropped the penalty on this. It used to be a fifty percent penalty on any amount that you failed to distribute. That has been reduced to twenty five percent on the shortfall. If you do correct it within two years, you're eligible to drop that penalty to ten percent.
Now you can still apply to actually waive.
That penalty as well, basically begging for forgiveness with the IRS to potentially get that wave. So if you do miss one, the first thing you need to do is talk to your advisor or your bank wherever your money is held, get the get the missed amount taken out, and then talk to your account about what to do next.
Sounds it's very important. It's just sounds that it's painful.
You don't want to mess around with that souf as we talked this morning with Eric and Nate. Of course, our retirement planning professionals from Class Financial, Nate Briby.
And Eric Schwartz.
Learn more online the website COLSS financial dot com. That's coss k l AA S Financial dot com. Urtelphon number six so eight four four two five six three seven no charge for that initial get to know your appointment at COSS Financial. It will beat complimentary to you. What if you inherited in IRA, We'll get the details on that and so much more as we continue our conversation with Nate and Eric, our retirement planning professionals from Class Financial.
We will do that next as Money and Motion continues right here. I'm thirteen ten wib A hanging out this morning with our retirement planning professionals, Eric Schwartz and Nate Bribe. Of course, they come to us from Claus Financial. The website Class financial dot com. That's Class k l a A s Financial dot com. Great website and resource to learn more about Class Financial, learn about their separate divisions.
You can learn about the team at Coss Financially. You can also sign up for the weekly Market Pulse newsletter that available to you at coss financial dot com. Del for number six oh eight four four two five six three seven, No charge for that. Initial'll get to know you appointment tech Lass Financial. It will be complementary to you again their numbers six oh eight four four two five six three seven. Talking this week about r mds, of course, they are an important important thing to know about.
And uh, as we kind of left off, I had mentioned inherited iras and Eric, let's talk a little bit about that.
Let's say you inherited one. Are there any special rules for these?
There are a lot of special rules fun before I before I kind of jumped into going over the the basics of inherited diaries. These are very very complex calculations in some cases, and make sure you're working with an advisor or or whoever is holding the funds that you inherit,
because inherited diaries they'll usually have rm ds. But beginning back in twenty twenty, when the first Secure Act legislation went through, they changed a lot of the rules surrounding how much you have to take out when you have to do it. They passed that in January, well, it took effect in January twenty twenty, and then by about January twenty twenty one we finally had enough clarity to actually go ahead and make some judgments based on it.
But inherited iras in general will have r and DS if you inherited those dollars before twenty twenty, so before Secure Act, the first Secure Act legislation. The distributions are based on your life expectancy. If you inherited in twenty twenty or later and the original owner had already started taking required minimum distributions, you will need to keep taking them out. And if you're a non spouse beneficiary, you have an additional rule that says you have ten years
to draw down the account. Okay, so you only have to take your required amount for the first nine years, but in the tenth year if you haven't, if you've only taken out the minimum amount, odds are there's a big chunk of money leftover that you then need to distribute in the final year, and at that point it's hitting you all in one tax year. So this would be where you'd want to work with an accountant and advisor to figure out how you spread out those distributions
and what makes the most sense for your situation. Now, if you're a spousal beneficiary, you do have the option to roll the funds into your own IRA. That way, you can defer your r and DS until you are seventy three. So basically in that case you're once you roll it over, the IRS views it as if you, the surviving spouse, actually saved all those dollars.
It sort of.
Loses the the inherited classification. And lastly, here as a spousal beneficiary, you can also leave it as an inherited IRA, in which case you take required minimum distributions based on your life expectancy. You might say, why would you ever
do that? It seems to reduce your flexibility if you have an age difference where you know where, for example, maybe the surviving spouse was younger, or in the case of passing away earlier in life, you actually have access without a penalty to inherited IRA dollars before fifty nine
and a half. So if someone passes away young and their surviving spouse thinks maybe they would need access to funds before they reach fifty nine and a half, they might leave it in an inherited IRA just to keep access to it.
Eric, you know, as we talk about this stuff too, I feel like we've talked in the past rmds and charitable giving charities. There is there is an aspect to these as well that folks need to be aware of, isn't there.
Yeah, So, as tax law has changed in the standard deduction has increased in the last eight years. Here, the ability to actually deduct charitable distributions through itemization has gotten a lot harder because most people don't have enough itemized deduction to actually exceed that standard deduction. So while while you're still doing good by by giving away giving away dollars to charitable organizations. It's many cases not shown up
on your tax return. So qualified charitable distributions or qcds have become much more popular and much more talked about. Qcds that you donate up to one hundred and eight thousand dollars per year and that's for twenty twenty five directly from your IRA to a qualified charity. Okay, So when this happens, you're basically it's going right to the charitable organization. And you do not then need to report
those dollars as taxable income. Okay, So it counts towards your required minimum distribution and and it's it's not going to show up as income on your tax return. Now, you do have to be seventy and a half in order to utilize the qcds. And it's you can't just say like, well, I see or I turned seventy and a half. Let's say in August and it's June, I'm going to do a QCD. Now you can't do that. You have to wait till you are actually seventy and a half to give away funds directly from your IRA
to a charity. They do need to come out by December thirty first, and they have to go to an eligible charity or five oh one C three organization donor advised funds and other supporting organizations. Those are actually not eligible to receive qcds, and you're not getting a charitable deduction in addition to the QCD benefit, because remember the QCD benefit is basically, hey, if I give ten thousand dollars to this charity, that's ten thousand dollars less of
income that I'm actually reporting on my tax return. So you don't get to claim a charitable deduction in addition to that. But you're actually you're actually coming out in many cases pretty well because you're actually able to deduct the full amount you're giving without itemizing. Now, last thing
here is keep good records. Because you're ten ninety nine R, which is your your tax reporting form that you get from your retirement account in January, it doesn't actually show the amount that went to a QCD, It just shows the total amount that came out. So you actually need to let your accountant know, hey, I gave you know, five thousand or ten thousand dollars of that away, so that the accountant can then exclude that from your income on your tax return.
Important important guidance and warnings there as well as we talk with Eric Swartz and Nate Briby. They are all retirement planning professionals from Class Financial. The website cossfinancial dot com. That's Class k l aas Financial dot com. It's all phone number six so eight four four two five six three seven, no charge for the initial gets to know you appointment tech Loss Financial.
It will be complementary to you.
So Nate, Eric, that kind of you know, we touched on qcds, would would somebody?
Is Is there a reason.
Why somebody would choose to use them even even if they're not required to take r mds.
Yeah, So this is another interesting nuance in the tax code. So once again, qcds can start at age seventy and a half, but your rm ds don't have to start until seventy three or seventy five. So obviously there's a little bit of a gap there where you have this opportunity to do qcds before you're required to even distribute funds from your IRA. So, honestly, this is kind of cute even by my standards, This even really makes sense. But a couple of reasons I thought of here really
you know, once again, to maximize charitable impacts. So if you're going to take a distribution, you know, just give for example anyway that makes no sense.
So you're gonna want to do it to you know, for pre.
Tax dollars directly from your IRA, and I say, basically everyone wins but the irs when you do qcds. Okay. So still in most cases, the qcds are probably the most powerful way to do to donate to charity because they really okay, So that is the key term. AGI sets a lot of different credits and deductions. Potentially your medicare part B premiums, there's issues with the tax torpedo
for social security. There's a thousand different things reasons why you potentially want to lower your AGI, which is you know, above the line deduction basically if you want to think of it that way.
So that's the main thing.
The other logical reason it's kind of once again super cute and nuance where if you think about rm ds in general, they're based on the size of your account, So those with larger account balances that are worried about higher taxes in the future or whatever whatever, whatever, getting money out of the produce future rm ds. Right, So if you're seventy and a half, you have two million dollars in your iran is going to be I don't know what that is, A one hundred and twenty thousand
dollars minimum or something. You want to say, what can I do to prevent future minimum distributions. It's like give twenty thousand dollars to your church today, right, there's twenty thousand dollars less that's going to be.
Subject to rm ds at some point in the future.
So it's been cute, but slight, you know, slight benefit there for giving as soon as.
You're talking this morning with Nate Briby and Eric Schwartz, they are our retirement planning professionals from COSS Financial. A lot of great information about our mds, also qualified charitable distributions. If you missed any part of the show, don't forget. You can always listen back Class Financial dot Com. That's coss k l a as Financial dot Com. Listen back to this in previous programs all at the website. You can also sign up for the weekly market Paul's newsletter.
Again the website Class Financial dot Com. Delphy number six oh eight four four two five six three seven.
No charge with the initial.
Gets new your appointment at Claus Financial. It will be complementary to you. Again their number six O eight four four two five six three seven. We'll set our conversation with Eric and Nate. Walso head on over to the Money in Motion Listener question corner. We will do that next as Money in Motion with Glass Financial continues here on thirteen ten. Wu ib A just a ton of great information in this week's program. Don't forget you can
always listen back Onlinecloss Financial dot com. That's coss k l a a s Financial dot com. Great website and can give us back this previous show's podcast. There teph number six O eight four four two five six three seven. No charge for that initial gets to know you appointment deck Coss Financial. It will be complementary to you. Before we head on over and get some questions listener questions
and the Money and Motion listener question corner. One last thing is as we as we talk this morning, Nate, when it comes to this stuff, it really seems to be like being proactive and strategic with taxes and of course what a great opportunity as well to not only be proactive and strategic, but also support your favorite charities.
Yeah, qcds are really one of the best tools you have in your toolkit for those charitably minded and seventy and a half, it's the best way to maximize your charitable impact and minimize your tax burden. So always consult with your financial advisor tax professional to determine if the qcds makes sense.
But honestly, in.
Most cases they're going to that's probably what your account's going to recommend to once again lower your AGI and reduce your tax file income.
What a great tool we got there.
Speaking of great tools and great opportunities, if you head on over the website clausefinancial dot com, you can always submit a question to be answered in the Money and Motion listener question corner. We have a question this week from Brent Brent Wrights, and he says, I'm forty five years old, so still a while from retirement, but wondering if it makes more sense for me to add more into my four ROH one K currently or work on
paying down my debt. I'm currently putting away ten percent of my salary into savings and Eric, I'll give this one on over to you, what do you advise for Brett?
Yeah, Brent, first of all, it's a great question, and when we get quite a bit and glad you're thinking about it now, and of course thank you for sending this to us ahead of time. It gives us a little time to think about the response and formulate something that hopefully will be pretty helpful. Let's, I think the short answer to this is you should be doing some of both. But in terms of you know which parts to focus on, let's kind of consider a few factors here.
So at this point in Brent's life, if he's in the prime wealth building phase, so we do want him to be thinking about saving for retirement. But we also know that, you know, debt is taking monthly cash flow both during the working years and in retirement, so we want to be we want to be paying that down as quickly as possible. So let's think about, first of all, the power of compounding. So retirement savings, especially in like a four oh one K plan where you have a
tax benefit, they benefit greatly from compounding. So the earlier that you have the money there, the more time the money has to grow. And at a really simple level, it's you know, your money is growing, and then that money is growing, right, so you're you're actually benefiting from it the longer you have the dollars in there now. On the flip side of that, though, high interest debt
works against you in the same way. Right if you have a high interest rate on some on a credit card, for example, you're actually falling further behind by the compounding the compounding interest on the debt. So think of about the type of debt that you have. So if you have credit card debt or other high interest rate loans are a great example, those should be priority. We should
be getting those paid off as quickly as possible. Mortgage det or other low interest debt options, those we would say are less urgent, and you wouldn't have to prioritize those oversaving for retirement. So create a list of all your debts and their interest rates and balances, and prioritize wiping out those high interest debts and like I said, it be a little bit less urgent on those lower interest rate loans. We also need to be thinking about
the four to one k match. So if Brent's putting away ten percent of his salary in general, I would assume he is he is getting the full employer match in his four oh one. K. No, that's not to say that there can be some strange calculation that the employer uses to figure out the match. But it sounds like you're hitting enough to get the full employer man. Because if you need to put in, you know, three percent,
and your employer will put in three percent. Well, if you're not putting in anything, you're you're leaving three percent on the table from the employer. So make sure you're doing enough to get that employer match. But Brent, it sounds like you're doing that right now.
Really good, good approach there so far as we're talking with Eric and Nate. Of course, Eric Swartz and Nate Bribey are retirement plan professionals from Class Financial Online. Classfinancial dot com. That's coss k l a A s Financial dot com. Sorry about that, Eric, speaking of approached, that's a proper approach is important to this stuff, isn't it?
Sure is no problem. Just a couple more things I wanted to go over here. You know, we can't just just give a quick straight answer, Sean. We gotta we gotta tell everybody about everything. The last couple of things here is before you you get really aggressive with paying down your debt, just to ensure that you have an emergency fund, so as we've talked about on the show, before three to six months of living expenses, because that's going to prevent you from going further into debt in
the future if unexpected expenses arise. So do prioritize that emergency fund before you're really tackling, really tackling those those short term debts. And finally, seek out professional advice. An advisor can help you figure out kind of the right balance of saving for retirement and paying down debt based on your specific situation and goals. So in short, here prioritize getting the full four one K match, tackle high
interest debt aggressively, and maintain an emergency fund. Once you've done those three things, then you can ramp up your retirement savings and know that you're striking a good balance between the two.
Really good show, as always from Eric Schwartz and Nate Bridy, our retirement planning professionals from Class Financial their website Class Financial dot com. It's coss k l aa as Financial dot com website is an amazing place. You miss any part today's program, You can always listen back at classfinancial dot com. While you're there, subscribe to the podcast. You can share the podcast as well some information from today's
show or previous show. I want to get out to your friends and family, you can do that again right online at Classofinancial dot com. Telephone number six oh eight four four two five six three seven. No charge for that initial get to know the appointment at COSS Financial. It will be complimentary to you again their number six oh eight four four two five six three seven. Want to hold on to that telephone number now because it's
time for the COLSS Quiz Question the Week. It works like this, in just a moment, to'll ask you the class quiz question the Week. We'll then have thirty minutes from the end today's program to call the Class Financial office right here in Madison at six oh eight four four two five six three seven. If you are the first caller with correct answer, win this week's prize, which is say twenty five dollars gift card to cheesecake Factory. This week's class Quiz question the week is this true
or false? If you were born between January first, nineteen fifty one and December thirty first, nineteen fifty nine, your RMDS would start at age seventy three. Is that true or is that false? Telephone number six oh eight four four to two five six three seven, first call. Correct answer when this week's prize that twenty five dollars gift card cheesecake factory.
Don't forget that.
As class financial office here in Madison six o eight four four two five six three seven. Eric's always great chatting with you. Have a great day, thanks, Sean Nate.
Great to talk to you again as well, and you do with the same thanks Sean.
Bye bye, and of.
Course doctor Marty Greer, she comes your way next here on thirteen ten wu ib A