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MeeT LARRY And beTh TuRneR HypotHetical case study #2

Larry is age 61; Beth is age 54

Have enough assets for retirement so they don’t need Larry’s $100,000 401(k)

Want to pass that $100,000 on to their son, Tim, and potentially their grandchild, Emily, using a stretch IRA*

how the stretch irA works: HypoTHeTIcAl cASe STudy1

initial investment:

$100,000

total distributions received:

$46,885

total distributions received:

$88,259

total distributions received:

$12,318

Federal Income Tax Paid:

$13,128

(in 10-year period illustrated)

Federal Income Tax Paid:

$3,449

Total After Taxes:

$33,757

Federal Income Tax Paid:

$24,713

Total After Taxes:

$8,869

Years in Distribution:

5

Total After Taxes:

$63,546

Years in Distribution:

2

Account Balance:

$172,738

Years in Distribution: Remainder of Tim’s Life

(only 10 years illustrated)

lArry: HuSbAnd

Beth: WIFe

tim: cHIld

At age 61, Larry rolled his 401(k) account balance of $100,000 into a traditional IRA. At age 70½, Larry begins taking RMDs.

Beth, now age 64, elects to treat the IRA as her own and does not continue taking distributions.

Tim, age 45 upon Beth’s death, maintains the account as an Inherited IRA and names his daughter Emily as his beneficiary. He receives distributions based on his life expectancy and can continue distributions throughout his lifetime. Please note, only 10 years of Tim’s life are depicted in this illustration.

Upon Larry’s death at age 71, his account balance was $172,738. The RMD due in the year of Larry’s death must be taken.

At age 70½, Beth begins taking RMDs. Beth dies at age 74 with a $255,935 account value.2

$350k

$300k

$250k

$200k

$150k

$100k

$50k

your grandchild as the beneficiary of your IRA.

*In addition to the possible estate taxes that may be imposed at your death, the generation skipping transfer tax may apply if you name

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