In this episode of “Moving In Retirement,” Annex Wealth Management’s Tom Parks and Deanne Phillips discuss residency vs. domicile, the necessity of undomiciling, and the breadth of economic data that could help you when deciding where to move.
As troops mass outside Ukraine and inflation hits a 40 year high, one Fed Chair indicated a 1 percent interest rate hike is possible. Was he jawboning? Annex Wealth Management’s Dave Spano and Derek Felske discuss what jawboning is and what the Fed may do.
In our recent poll, we asked readers “Will the Superbowl Indicator be accurate this year?”
If you’re new to the concept of the Super Bowl Indicator, it’s a theory developed by a journalist that states that if the winning team is from the National Football Conference (NFC), or was in the NFL before its 1966 merger with the American Football League, then stocks will have a bull market that year. If the winning team comes from the American Football Conference (AFC), then the next year will see a bear market.
Axiom readers may have noticed that recently, the Superbowl Indicator hasn’t been right for six years. 56% of our readers responded that they didn’t think the indicator would be accurate this year.
We will never underestimate the savvy of our readers.
Our readers may be hoping the Super Bowl Indicator won’t be correct. Since most of our respondents said they will be cheering for the Cincinnati Bengals (AFC) (57%), and if the Super Bowl Indicator is correct, then we’d be seeing a bear market over the next year.
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Every December, we see financial institutions try to make sure all the annual Required Minimum Distributions (RMDs) are paid out prior to December 31st. This week’s Money Do: Consider satisfying your RMD sooner rather than later.
As a refresher, RMDs are required on traditional retirement accounts once an individual turns 72-years-old. In addition, certain Inherited IRAs have annual RMDs as well. The amount is determined on an annual basis by using the life expectancy tables provided by the IRS and the fair market value of the account as of December 31st of the prior year.
The penalty for not taking your RMD can be severe: up to a 50% penalty for any undistributed RMD. For example, let’s say that you forgot to take a $10,000 distribution. Not only is all $10,000 taxed as ordinary income when it is finally taken, there is also a $5,000 penalty that needs to be paid on top of the tax. OUCH!
While the penalty can be avoided as long as the distributions occur by December 31st each year, you still should consider taking your RMD before December. Some points to consider:
- If you’re interested in doing Roth Conversion during the year, you cannot do the conversion until your RMD is satisfied.
- Custodians have cutoff times in place to ensure distributions are processed by year-end.
- If you die during the year without having satisfied the RMD, that burden passes on to your beneficiaries (including the tax and potential penalty), which can make things very rushed and more difficult for your beneficiaries.
- If you plan to make Qualified Charitable Distributions (QCDs) from your IRA, remember that charities need donations throughout the year, not just at the end of the year. In addition, your beneficiaries cannot make QCDs from your IRA after your death, so make sure to accomplish those QCDs earlier in the year.
- While we never want you to try to time the market, by having your RMD satisfied earlier in the year, the distributed funds are no longer growing tax-deferred inside the IRA. While tax-deferred growth is generally a good thing, it can also result in higher RMDs next year if you wait until the very end of the year to withdraw your RMDs.
One thing to consider is setting up the RMDs for an automatic distribution. This can be monthly, quarterly, or annually. This eliminates the year-end rush or possibility of forgetting to take them each year.
We understand that not everyone can or wants to take RMDs sooner and that there are some benefits to waiting to take your RMD. Often people want to wait until their prior year taxes are completed to be able to adjust their tax planning or withholding percentages. On occasion, there can also be tax legislation that changes the rules during the year that may impact whether you are required to take an RMD or not, such as the CARES Act of 2020.
We encourage you to have a proactive approach to satisfying your RMD each year to avoid some of the pitfalls we noted and make sure you are not rushed at year-end trying to get your distribution taken.
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70,000 fans will watch Super Bowl LVI at SoFi Stadium.
wallethub.com/blog/super-bowl-facts/1589
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