Are You Setting Your Spouse Up for a Tax Day of Reckoning? Part 2

 Are You Setting Your Spouse up for a Tax Day of Reckoning? Part 2

“In this part 2, we’re going to discuss how RMDs – or Required Minimum Distributions –from retirement accounts can cause higher tax rates for a surviving spouse.

Our federal tax system is progressive.  That means as my income increases above specified amounts, any additional income is generally taxed at a higher rate.  So in simplistic terms, a couple may be paying tax at a rate of 15% until taxable income reaches about $74,000.  At that point, each additional dollar may now be taxed NOT at 15% BUT at 25%.  This can become burdensome for a surviving spouse when a couple has a lot of wealth in retirement accounts.

Owners of retirement accounts are generally required to take annual Minimum Distributions and pay tax on those dollars.  A married couple can generally have up to about $74,000 of taxable income before paying federal tax at 25%.  However, a SINGLE taxpayer starts to pay 25% tax NOT at $74,000 but at ONLY about $37,000.  Sometimes these Required Withdrawals can easily push that surviving spouse into that higher tax bracket causing higher taxes possibly for the rest of his/her life.

Saving taxes today is great, but wise Tax Planning should also consider potential future taxes – even for a survivor.  Every situation is different so you’re wise to work with a team of experienced professionals to help you make wise decisions.

For more helpful information like this, visit our website at PayneWealthPartners.com.  Thank you!”

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Published: December 14, 2014

Authored by: Terry Prather, CFP®, ChFC®

Direct Phone: 812-602-6307

Email: twprather@paynewealthpartners.com

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The information in this material is only as current as the date indicated, and may be superseded by subsequent market events or for other reasons. While all information prepared in this document is believed to be accurate, any statements of opinion constitute only current opinions of Payne Wealth Partners, Inc., which are subject to change and which Payne Wealth Partners, Inc. does not undertake to update. Accordingly, you should not put undue reliance on these statements. The information does not attempt to examine all the facts and circumstances that may be relevant to an individual’s financial needs. Payne Wealth Partners, Inc. is not soliciting any action based on these statements.

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