Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
How retirement savers are stretching their IRAs: The QLAC archipelago
Retirees may opt to buy a Qualified Longevity Annuity Contract within their IRAs and employer-sponsored retirement plans to defer the required minimum distributions until they reach the age of 85, according to The Street. This option is recommended for tax-sensitive retirees who turn 70 1/2, the age when they have to start taking RMDs. However, the tax bill waiting for them when they turn 85 may be significantly high. — The Street
Turning business obstacles into business opportunities
Although taxes can be obstacles for small businesses, clients can turn them into opportunities by creating tax plans that can boost savings, according to the Huffington Post. Small business owners should plan ahead for their capital expenditures and retirement payments to minimize their tax liability and avoid costly mistakes. — Huffington Post
Who should clients leave their IRA to?
From a tax perspective, clients are better off naming their spouse to be the beneficiary of their IRAs, according to this article on Kiplinger. Under the IRA rules, only the spouses have the option to transfer the inherited assets to their own IRAs, which could mean required withdrawal percentage and more time for the money to grow tax-deferred. IRA investors may also consider younger individuals to be their beneficiaries, as the required minimum distribution amount will be smaller because it will be based on a longer life expectancy. A see-through trust is another option, as the RMD amount will depend on the beneficiaries' stretching abilities. — Kiplinger
Can clients write off a loss on their IRA?
A loss on IRA is tax deductible if the loss is incurred in a Roth account, according to MarketWatch. Clients who want to take a loss on their Roth IRAs should close the accounts, and the total amount they got from closing the accounts should be lower than the basis. They should also report the loss as a miscellaneous itemized expense. — MarketWatch