More For Your Money Radio Show

Personalized Financial Planning

A key theme is the importance of personalized financial planning. Uncommon Cents Investing focuses on “what you could do, not what you should do,” avoiding blanket recommendations because everyone’s situation is unique. Risk tolerance is also discussed, with the advisors noting that they adjust clients’ preferences if their perceived risk tolerance changes, especially during market fluctuations. It’s emphasized that viewing market volatility with a long-term perspective is important, and current dips might be minor in the context of longer investment horizons.

Required Minimum Distributions

The episode features a caller asking about a “disbursement” at age 73, which leads to an explanation of Required Minimum Distributions (RMDs). RMDs are required for pre-tax retirement accounts like 401(k)s and traditional IRAs, but not for Roth IRAs. The age for RMDs has changed over time. The first year a distribution is required, there’s a leeway until the tax filing deadline, but subsequent distributions must be taken by December 31st. It’s highlighted that the RMD amount is based on age and the prior year’s account value.

Qualified Charitable Distributions

Qualified Charitable Distributions (QCDs) are explained as a strategy for those of RMD age who also make charitable donations. By directing the RMD to a qualified charity, the individual can avoid paying taxes on that amount. This can result in significant tax savings. The process involves having the investment company make the check directly payable to the charity. While a 1099 form will still be issued, the QCD can be adjusted for on taxes as an above-the-line deduction. It’s emphasized that this is for individuals already making charitable contributions, allowing them to do so in a more tax-efficient way. Converting all pre-tax retirement funds to a Roth IRA would eliminate the ability to utilize QCDs.

Investing for Children and Grandchildren

Strategies for investing for children are also covered. Opening standard bank accounts for children’s gift money is seen as potentially less beneficial than investment accounts due to the potential for growth over a long time horizon. Several types of accounts are discussed:
• UTMA (Uniform Transfer to Minors Act/Trust) accounts are custodial accounts for minors where the assets become the child’s property, in Wisconsin, at age 21.
• Roth IRAs for minors are possible as long as the child has earned income. A parent or custodian is required.
• 529 plans are college savings plans that offer a state tax deduction in Wisconsin for contributions (up to $5,000 per beneficiary in the current year). Unused funds in a 529 can now be moved to a Roth IRA, making them more flexible. Beneficiaries on 529 plans can also be changed.