YouTube video by Craig Wear, CFP® explaining how the SECURE Act ended the 'Stretch IRA', forcing most inherited IRAs to be withdrawn within 10 years and creating large tax burdens for heirs. Wear illustrates with an example (David, age 68 with $1.8M in IRAs) and recommends proactive Roth conversions to pay tax during the owner's lifetime and leave tax-free assets to heirs; he also promotes a free RMD calculator and his 'Rothology' approach.
Chapters
Hey, you guys. So what used to be the Stretch IRA has been destroyed. And that changes everything for your family. Imagine this scenario. David's 68 years old. He had a million eight in IRAs. His kids were both high earners. If he left his IRAs alone and did nothing with them in converting them to a Roth IRA, they'd have to drain them within 10 years under the Secure Act. So that's going to push the heirs into highest tax brackets during their prime earning years. What should have been kind of a blessing turns out to be a burden. So here's the basics. The new rules are this. The RMD age move to later, but heirs must now drain the accounts within 10 years of inheriting them. The tax problem that creates for the heirs is now withdrawals stack on top of all their other income, pushing them into even higher brackets. And if they're taking Social Security when you pass, then that all of a sudden causes their Social Security to be higher taxed, it causes their Medicare premium to be higher tax. All because you just kind of left it alone, left it to them so they can do all the great tax planning they want to. And you leave them this behemoth of an IRA and all of a sudden now they got a tax problem again. A Roth IRA, if you convert, still has to be drained in 10 years, but the withdrawals are tax free. So you either get to leave your money in a position where it causes tax for everybody else, or you leave it where you pay the tax that's most beneficial to you during your lifetime. You put yourself in a better position of having tax free wealth. And at the same, the tertiary benefit is you leave it to your kids and they're good. So converting now protects your heirs and avoids handing them an IRS problem. Your legacy shouldn't be a tax bill. The SECURE act means you must plan differently. And if you want to protect your heirs, you got to do it up front. I've got a lot of resources we've created to help you to understand this. Probably the best one that I can offer to you absolutely free is an RMD calculator that we have where we took it a step further than most RMD calculators in that we've taken the experiences of thousands of clients, thousands of iterations and we have said, okay, here's what your RMDs are likely to be based on your age today and your balances today and the rates of return that you want to assume. But we take it a step further and say, look, here's what clients in similar circumstances as you have been able to avoid by doing aggressive Roth conversions the way that we teach through our Rothology system. So click below, check out the resource. I hope it's a benefit to you. As always, please subscribe to the channel if you like this kind of stuff. That way you're first to know. If you if you don't mind, click the thumbs up button. Let me know that you like this kind of stuff. And that's your way of voting whether this is good stuff or not, so that I know what kind of content to create in the future. Thanks for tuning in. Take care. Have a great day. God bless you.
