Ask Annex - Annex Wealth Management

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Question:

After a portfolio review, what comes next in the process of becoming a client of Annex Wealth Management?

Answer:

Question:

Under the new federal tax law for 2018, the standard deduction for joint filers has been increased to $24,000. Previously seniors, who filed jointly were allowed to increase their standard deduction of $12,700 by $2,500. Does the new tax law still allow seniors this increase? Or do seniors get the shaft again?

Answer:

The new tax law did not remove the additional deduction for those over 65, blind or disabled. The amount for an unmarried taxpayer is $1,600 and for married couples it is $1,300 per person. For a couple over 65 their standard deduction would be $26,600, which is $24,000 plus $1,300 for each taxpayer.

Question:

Since we will have lower federal tax the next few years should I be taking a larger minimum required withdrawal from my IRA (I’m over 70). The withdrawal pushes me into a higher tax bracket and I pay more for my Medicare Part B and Part D IRMMA. If I withdraw a big amount now and put it in a managed account, would it pay to be in a lower tax bracket? But the earnings on the large withdrawal in the managed account would be taxed.

Answer:

If you’re in a lower tax bracket (10% / 12%), it may be beneficial to take an additional amount out over and above what your required minimum distribution is. Rather than putting that amount into a managed taxable account, you could do a Roth Conversion and put it into a Roth IRA. This will allow the earnings to grow tax free, and there’s no age limitation on Roth Conversions.

For instance, if your RMD was $40,000, you still have to take out your RMD of $40,000 and either put it in a taxable account or bank account, but you could then do a Roth Conversion as an additional amount depending on your tax plan. Your total taxable IRA distributions for the year would be greater than your RMD.

If your additional IRA distributions cause you to go into a higher tax bracket and your Medicare premiums to be higher, it may not be advantageous to take additional money out of your IRA. We can help you project out what your tax rate would be in later years compared to now and see if taking money out earlier would be advantageous. Projections like that are typically part of Annex Wealth Management’s financial plan and comprehensive wealth management.

Question:

Looks like the Federal Reserve Board could cause major disruptions for the stock market if they continue to raise interest rates. what are your thoughts about how the Fed will move forward in the short and long term given their mission?part of Annex Wealth Management’s financial plan and comprehensive wealth management.

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