5 Steps to Determine How Much Income You’ll Need in Retirement

Mar 5, 2024 | Retirement Planning

5 Steps to Estimate Retirement Income Needs

USE YOUR CURRENT INCOME AS A STARTING POINT

It’s common to discuss desired annual retirement income as a percentage of your current income. Depending on who you’re talking to, that percentage could be anywhere from 60% to 90%, or even more. The appeal of this approach is its simplicity. It seems fairly common-sense – Your current income sustains your present lifestyle, so taking that income and reducing it by a specific percentage to reflect the fact that there will be certain expenses you’ll no longer be liable for (e.g., payroll taxes) will, theoretically, allow you to sustain your current lifestyle.

The problem? It doesn’t account for your specific situation. For example, if you want to travel extensively in retirement you might easily need 100% (or more) of your current income to get by. It’s fine to use a percentage of your current income as a benchmark, but it’s worth going through all of your current expenses in detail, and really thinking about how those expenses will change over time as you transition into retirement.

PROJECT YOUR RETIREMENT EXPENSES

Your annual income during retirement should be enough (or more than enough) to meet your retirement expenses. That’s why estimating those expenses is a big piece of the retirement planning puzzle. But you may have a hard time identifying all of your expenses and projecting how much you’ll be spending in each area, especially if retirement is still far off. To help you get started, here are some common retirement expenses:

    • Food and clothing
    • Housing: Rent or mortgage payments, property taxes, homeowners insurance, property upkeep and repairs
    • Utilities: Gas, electric, water, telephone, cable TV
    • Transportation: Car payments, auto insurance, gas, maintenance and repairs, public transportation
    • Insurance: Medical, dental, life, disability, long-term care
    • Health-care costs not covered by insurance: Deductibles, co-payments, prescription drugs
    • Taxes: Federal and state income tax, capital gains tax
    • Debts: Personal loans, business loans, credit card payments
    • Education: Children’s or grandchildren’s college expenses
    • Gifts: Charitable and personal
    • Savings and investments: Contributions to IRAs, annuities, and other investment accounts
    • Recreation: Travel, dining out, hobbies, leisure activities
    • Care for yourself, your parents, or others: Costs for a nursing home, home health aide, or other type of assisted living
    • Miscellaneous: Personal grooming, pets, club memberships

Don’t forget that the cost of living will go up over time, and keep in mind that your retirement expenses may change from year to year. For example, you may pay off your home mortgage or your children’s education early in retirement. Other expenses, such as health care and insurance, may increase as you age. To protect against these variables, build a comfortable cushion into your estimates (it’s always best to be conservative). Finally, have a financial professional help you with your estimates to make sure they’re as accurate and realistic as possible.

DECIDE WHEN YOU’LL RETIRE

To determine your total retirement needs, you can’t just estimate how much annual income you need. You also have to estimate how long you’ll be retired. Why? The longer your retirement, the more years of income you’ll need to fund it. The length of your retirement will depend partly on when you plan to retire. This important decision typically revolves around your personal goals and financial situation. For example, you may see yourself retiring at 50 to get the most out of your retirement. Maybe a booming stock market or a generous early retirement package will make that possible. Although it’s great to have the flexibility to choose when you’ll retire, it’s important to remember that retiring at 50 will end up costing you a lot more than retiring at 65.

ESTIMATE YOUR LIFE EXPECTANCY

The age at which you retire isn’t the only factor that determines how long you’ll be retired. The other important factor is your lifespan. We all hope to live to an old age, but a longer life means that you’ll have even more years of retirement to fund. You may even run the risk of outliving your savings and other income sources. To guard against that risk, you’ll need to estimate your life expectancy. You can use government statistics, life insurance tables, or a life expectancy calculator to get a reasonable estimate of how long you’ll live. Experts base these estimates on your age, gender, race, health, lifestyle, occupation, and family history. But remember, these are just estimates. There’s no way to predict how long you’ll actually live, but with life expectancies on the rise, it’s probably best to assume you’ll live longer than you expect.

IDENTIFY YOUR SOURCES OF RETIREMENT INCOME

Once you have an idea of your retirement income needs, your next step is to assess how prepared you are to meet those needs. In other words, what sources of retirement income will be available to you? Your employer may offer a traditional pension that will pay you monthly benefits. In addition, you can likely count on Social Security to provide a portion of your retirement income. To get an estimate of your Social Security benefits, visit the Social Security Administration website (www.ssa.gov). Additional sources of retirement income may include a 401(k) or other retirement plan, IRAs, annuities, and other investments. The amount of income you receive from those sources will depend on the amount you invest, the rate of investment return, and other factors. Finally, if you plan to work during retirement, your job earnings will be another source of income.

NOT A CORNERSTONE CLIENT?

If you have questions about your financial plan please contact us today to schedule a complimentary, no obligation review with one of our advisors. Call 605.357.8553 or email cfsteam@mycfsgroup.com.

M22-12417 Exp 2025.09.27. This information is not intended to be a substitute for specific individualized tax, legal, estate, or investment planning advice as individual situations will vary. Please discuss these matters with the appropriate professional.

Backdoor Roth IRA Baggage

Feb 16, 2024 | Investment Management, Retirement Planning, Tax Planning Strategies

Cornerstone is pleased to bring you this article by Ed Slott and Company, LLC. As a member of Ed Slott’s Elite IRA Advisor Group™ Gordon keeps Cornerstone professionals on the cutting-edge of retirement, tax law, and IRA distribution planning through continuous training with Ed Slott and his team of IRA Experts.

Membership includes immediate notification of changes to the tax code and updates on retirement planning, and 24/7 access to Ed Slott and Company, LLC to confer with on complex cases. Just one of the tools in the Cornerstone arsenal that helps you avoid unnecessary taxes and fees on your retirement dollars! As always, give us a call if you’d like to discuss!

BACKDOOR ROTH IRA BAGGAGE

A Backdoor Roth IRA strategy is when high-income earners – those over the Roth IRA income threshold ($230,000 – $240,000 for those married filing joint in 2024; $146,000 – $161,000 for single filers) – can make non-deductible contributions to a traditional IRA and then convert the traditional IRA to a Roth, thereby circumventing the income limitations. (We can expel the notion that this is a step transaction or that a Backdoor Roth IRA is on the precipice of illegality. In 2018, a tax law specialist with the IRS Tax-Exempt and Government Entities Division stated that Backdoor Roth IRAs will not be challenged by the IRS.)

You may have heard, “If your income is too high for a direct Roth IRA contribution, just do a Backdoor Roth.”

 

Easy-peasy, right? Maybe not. 

 

Backdoor Roth IRA baggage

A Backdoor Roth IRA transaction can carry a lot of “Backdoor baggage,” including:

1. The Pro-Rata Rule – No Cherry Picking. The pro-rata rule dictates that when an IRA contains both nondeductible (after-tax) and deductible (pre-tax) funds, each dollar withdrawn (or converted) from the IRA must contain a percentage of tax-free and taxable funds. This ratio is based on the percentage of after-tax dollars in all of a person’s traditional IRAs, SEP and SIMPLE plans. You can’t target just the after-tax IRA dollars and only convert those. Additionally, once you have after-tax dollars (basis) in your IRA, getting it cleaned out could require some heavy lifting. For example, the entire account could be converted, but that might be a tax hill too steep to climb. Or, the pre-tax dollars could be segregated by rolling them into a 401(k). But this assumes access to a 401(k) that allows a rollover into the plan.

2. Multiple Tax Forms.Every Backdoor Roth transaction creates three or four tax forms. When a non-deductible contribution is made to an IRA, you must declare that there are after-tax dollars in the account. This is done on IRS Form 8606. Failure to file Form 8606 could result in double taxation. When dollars leave a traditional IRA via conversion, a 1099-R is generated the following year. Form 5498 is also created the next year to document the conversion. And when tax time comes around, the same Form 8606 is used to document the pro-rata math and how much of the conversion is taxable.

3. Crossing Tax Years. What if you make a prior-year (2023) non-deductible IRA contribution in January 2024, but then immediately convert? That will require a Form 8606 for the 2023 tax return to claim the basis. The conversion will generate a 1099-R and 5498 (issued in 2025) for the 2024 tax return, and a second Form 8606 must be filed with the 2024 return documenting the pro-rata math. Four forms. (Yes, good tax software can certainly help.)

Be aware that, until the after-tax dollars are cleared out of a traditional IRA, it’s your (the taxpayer’s) responsibility to track the basis. And, if you’re a high earner who continues to make (and convert) non-deductible contributions each year, the annual baggage of a Backdoor Roth IRA can pile up and follow you like an overloaded luggage cart with a wobbly wheel.

By Andy Ives, CFP®
IRA Analyst, Ed Slott, LLC

This information, developed by an independent third party, has been obtained from sources considered to be reliable, but Raymond James Financial Services, Inc. does not guarantee that the foregoing material is accurate or complete. Changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Copyright ©2024, Ed Slott and Company, LLC Reprinted from The Slott Report, January 31, 2024 with permission. https://www.irahelp.com/slottreport/how-do-youreport-2023-roth-ira-contributions-your-tax-return-answer-may-surprise-you-0. Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.

Raymond James is not affiliated and does not endorse Ed Slott and Company, LLC, The Slott Report, or Andy Ives.

Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.

Time is Running Out for 2023 QCDs

Dec 15, 2023 | Charitable Giving, Retirement Planning, Tax Planning Strategies

Time is Running Out for 2023 QCDs

Cornerstone is pleased to bring you this article by Ed Slott and Company, LLC, an organization providing IRA education and analysis to financial advisors, institutions, consumers, and media across the country. Our association with this organization helps us stay up to date on the latest developments in IRA and tax law. As always, give us a call if you’d like to discuss!

If done correctly, a QCD can satisfy your required minimum distribution (RMD) for the year and help reduce your income taxes

If you are charitably inclined and have an IRA, you might want to consider doing a Qualified Charitable Distribution (QCD) for 2023. If done correctly, a QCD can satisfy your required minimum distribution (RMD) for the year and help reduce your income taxes. The deadline for a 2023 QCD is fast approaching – December 31, 2023. Many custodians have even earlier cutoffs. Don’t miss out on this valuable tax break. Here is what you need to know.

  •   You must be age 70 ½.

IRA owners who are age 70½ and over are eligible to do a QCD. This is more complicated than it might sound. A QCD is only allowed if the distribution is made on or after the date you actually attain age 70 ½. It is not sufficient that you will turn 70 ½ later in the year.  

  •   You can be a beneficiary and do a QCD.

QCDs are not limited to IRA owners. An IRA beneficiary may also do a QCD. All the same rules apply, including the requirement that the beneficiary must be age 70 ½ or older at the time the QCD is done. 

  •   QCDs are only allowed from IRAs.

You may take QCDs from your taxable IRAs funds. QCDs are also permitted from SEP and SIMPLE IRAs that are not ongoing. An ongoing SEP and SIMPLE plan is defined as one where an employer contribution is made for the plan year ending with or within the calendar year in which the charitable contribution would be made. QCDs are not available from an employer plan. 

  •   There is a $100,000 annual limit for 2023.

QCDs are capped at $100,000 per person, for 2023. For a married couple where each spouse has their own IRA, each spouse can contribute up to $100,000 from their own account. 

  •  You can satisfy your RMD with a QCD.

A QCD can satisfy your required minimum distribution (RMD) for the year. A QCD can be more than the RMD amount for the year as long as it does not exceed the $100,000 annual limit. 

  •   Only taxable IRA funds are eligible.

QCDs apply only to taxable amounts. No basis (nondeductible IRA contributions or after-tax rollover funds) can be transferred to charity as a QCD. QCDs are an exception to the pro-rata rule which usually applies to IRA distributions. 

  •   You must do a direct transfer.

If you want to do a QCD, you must make a direct IRA transfer from the IRA to the charity. If a check that is payable to a charity is sent to you for delivery to the charity, it will qualify as a direct payment. 

  •   New rules allow QCDs to split interest entities.

A QCD can be made to a charity which is eligible to receive tax-deductible charitable contributions under IRS rules. The QCD rules are not available for gifts made to grant-making foundations or donor-advised funds. The contribution to the charity would have had to be entirely deductible if it were not made from an IRA. A taxpayer does not have to itemize deductions, but the gift to the charity still has to meet all of the deductibility rules.

New rules for 2023 allow a QCD to a split interest entity such as a charitable gift annuity. This can only be done in one year of your lifetime and is limited to $50,000 for 2023. 

  •   The charitable substantiation requirements apply.

You should have documentation to substantiate the donation (something in writing from the charity showing the date and amount of the contribution and a statement that you received nothing of value in return). 

  •   You must report the QCD on your tax return.

The IRA custodian will not be separately reporting the QCD. There is no code or box on the 1099-R to identify the QCD. It will be up to you to let the IRS know about the contribution by including certain information on your tax return.

5 Areas of Comprehensive Financial Planning

Are you aware of – and taking advantage of – every opportunity to reduce your tax burden?

By coordinating all five areas of wealth management, a Cornerstone Plan gives you the confidence to achieve the dreams calling to you. We would be honored to help you with:

  • Retirement Planning, including 401k analysis
  • Tax Strategies, including tax planning for business owners
  • Investment & Portfolio Management
  • Estate planning, including business succession & exit strategies
  • Insurance Planning

Get #CornerstoneConfident – book a financial planning strategy appointment today by calling 605-357-8553. 

Membership in Ed Slott’s Elite IRA Advisor Group™  is one of the tools our advisors use to help you avoid unnecessary taxes and fees on your retirement dollars. Gordon attends in-depth technical training on advanced retirement account planning strategies and estate planning techniques. And semiannual workshops analyzing the most recent tax law changes, case studies, private letter rulings, Congressional action and Supreme Court rulings help keep attendees on the cutting-edge of retirement, tax law and IRA distribution planning. Through his membership, Gordon is immediately notified of changes to the tax code and updates on retirement planning, and he has 24/7 access to Ed Slott and Company LLC to confer with on complex cases.

This information, developed by an independent third party, has been obtained from sources considered to be reliable, but Raymond James Financial Services, Inc. does not guarantee that the foregoing material is accurate or complete. Changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Copyright ©2023, Ed Slott and Company, LLC Reprinted from The Slott Report, December 13, 2023 with permission. Author: By Sarah Brenner, JD, Director of Retirement Education, Ed Slott & Company. https://www.irahelp.com/slottreport/time-running-out-2023-qcds. Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article. Raymond James is not affiliated and does not endorse Ed Slott and Company, LLC, The Slott Report, The Elite Advisor Group™, or Sarah Brenner, JD.

CSP #361807 Exp 12.15.24

Investment Committee Meeting Summary – November 2023

Nov 28, 2023 | Andrew Ulvestad, AAMS®, Financial Planning, Investment Management, Retirement Planning

Investment Committee Meeting Summary – November 2023

Investment Committee Meeting Summary:

Our advisors review fund performance by day, week, and month. And the Investment Committee meets at least quarterly to evaluate the portfolio construction of advisory accounts, proactively rebalance portfolio construction, watch for red flags and perform stress tests to gauge performance in various market environments.

Market Insights and Strategies

With the end of 2023 swiftly approaching, it’s a pivotal time to stay up to date on new developments. We’ve witnessed a year with its fair share of economic and market twists and turns. The journey from a rather challenging 2022 to the present has been a roller coaster ride, marked by recession fears, inflation concerns, rising interest rates, global unrest, and the ever-looming possibility of a federal government shutdown.

In reflecting on 2022, we remember it was a tough year for equities, with major market indexes like the S&P 500 ending in the red. However, stepping into 2023, we’ve observed a different story unfold. As of late September, equity markets have delivered positive returns. It’s a testament to the resilience of the market and the dynamism of investors.

Constantly Adapting

In response to the ongoing challenges, we’ve proactively adjusted our investment approach to better suit the changing landscape. During our investment committee meeting, we utilized our relationships with T. Rowe Price, as we carefully reviewed our investment strategies together to help ensure they are in sync with the present market conditions. One of our key observations was our favoritism of large-cap growth funds to small-cap positions. This strategic shift reflects our anticipation of potential rate hikes by the Federal Reserve and the subsequent impact on the market. Typically, larger companies are better equipped to weather the effects of such rate hikes.

Certain of Uncertainty

Inflation has seen a slight easing since its peak in January 2022 but continues to remain above the Federal Reserve’s targeted 2%. This lingering level below the threshold underscores the challenge of curbing spending, with the final leg of this journey proving to be the most difficult. Meanwhile, the Federal Reserve has recently hit the pause button on rate hikes, although the specter of future increases looms on the horizon with market expectations suggest a potential rate hike in December. It is worth noting that historical data indicates positive market performance after the conclusion of a hiking cycle. Conversations about a possible recession continue, reminding us that economic downturns are inherent phases of the business cycle. In the realm of global geopolitics, tensions such as the Russia-Ukraine conflict cast shadows of uncertainty over the market, prompting us to stay vigilant of potential international market volatility. While forecasting the future remains elusive, our preparation for various scenarios is unwavering.

Our Commitment to Your Financial Success

We are remaining focused on an informed, long-term planning and a diversified approach. The decisions we make are grounded in our commitment to our clients’ financial well-being. We anticipate further market volatility and continue to adapt our strategies accordingly.

As we look ahead, we’ll keep a vigilant eye on market movements and remain steadfast in our dedication to your financial success. We appreciate your trust in our team and are here to navigate the ever-changing financial landscape together.

As always, we’re here for you. Please feel free to reach out if you have any questions or need assistance with your financial planning. Thank you for your continued trust in our team.

Market corrections – even recessions – are part of normal market cycles so it’s important you work with a financial advisor who understands your risk tolerance and wants to help you protect and preserve wealth. We’re with you every step of the way, so you can focus on what matters most to you.

Are you confident your assets are invested and managed appropriately? 

Get #CornerstoneConfident – book a financial planning strategy appointment today by

calling 605-357-8553 or emailing cfsteam@mycfsgroup.com.

Any opinions are those of the author and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions, or forecasts provided herin will prove to be correct. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Past performance is no guarantee of future results. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation and diversification. To determine what is appropriate for you, consult a qualified professional. Raymond James is not affiliated and does not endorse T. Rowe Price. CSP #339165 11/26/23

Confusion over RMD Distribution

Nov 7, 2023 | Estate Planning, Retirement Planning, Tax Planning Strategies

Confusion Over Required Minimum Distributions (RMDs)

Cornerstone is pleased to bring you this article by Ed Slott and Company, LLC, an organization providing IRA education and analysis to financial advisors, institutions, consumers, and media across the country. Our association with this organization helps us stay up to date on the latest developments in IRA and tax law. As always, give us a call if you’d like to discuss!

To the surprise of many, the IRS released proposed SECURE Act regulations last year requiring beneficiaries (on some occasions) to take required minimum distributions (RMDs) during the 10-year payout period.

In the past, most non-spouse beneficiaries could “stretch” RMDs from inherited accounts over their own single life expectancy. RMD rules for 2023 are more confusing, thanks to the 2019 SECURE Act passed by Congress, and IRS proposed regulations of Feb. 23, 2022.

The 2019 SECURE Act included the 10-year payout rule, requiring most retirement account beneficiaries for deaths in 2020 or later to empty the retirement account by the end of the 10th year following the year the account owner died.

The IRS issued proposed regulations on February 23, 2022, taking the position that when death occurs on or after the required beginning date (RBD), a non-eligible designated beneficiary must take annual RMDs and empty the account under the 10-year rule.

The rule requiring annual RMDs when an account owner dies on or after her RBD is sometimes called the “at least as rapidly” (ALAR) rule. While it does not require the beneficiary takes the same amount that the IRA owner was taking, it does require that the process of taking RMDs continue. This interpretation surprised many who thought the 10-year rule would apply like the pre-SECURE Act 5-year rule, which did not require annual RMDs.

 

How has the IRS responded to RMD confusion?

The IRS has waived some RMD penalties when certain beneficiaries fail to take an RMD due to a reasonable error. Waivers are only applicable to RMDs within the 10- year period and you are usually required to file Form 5329 to request a waiver. For 2023, SECURE 2.0 reduces the penalty from 50% to 25% of the amount not taken. The penalty is further reduced to 10% if the missed RMD is taken and the penalty is paid during a 2-year correction window.

Last year, the IRS issued Notice 2022-53, which waived penalties for missed 2021 and 2022 RMDs within the 10-year period, for deaths that occurred in 2020 or 2021. Recently, the Service released Notice 2023- 54, extending the penalty waiver to cover missed 2023 RMDs when the death occurred in 2020 or 2021. It also excuses the penalty for missed 2023 RMDs when the death took place in 2022.

Although the Notice does not state this directly, it appears that since the penalty is waived, the 2023 RMD, like 2021 and 2022 RMDs within the 10-year period, doesn’t have to be taken. It also appears that these missed RMDs within the 10-year period will not have to be made up. (Note that if these RMDs were already withdrawn, they cannot be returned or rolled over.)

Example:

Lola died in 2020 at age 75 with a traditional IRA. Her adult daughter, Anabella, is a non-eligible designated beneficiary subject to the 10-year rule under the SECURE Act.

WHY?  The proposed regulations say that because Lola died after her RBD, Anabella must take RMDs based on her single life expectancy during years 1-9 of the 10-year period. However, Notice 2022-53 says that if Anabella failed to do so for 2021 and 2022, there is no penalty on the missed RMDs. Notice 2023-54 extends this relief to the 2023 RMD. If Anabella had already taken a distribution, believing she needed to take an RMD for 2023, she may not roll over those funds. Notice 2023-54 also provides relief to successor beneficiaries subject to RMDs within the 10-year rule.

Example:

Dave died in 2019 at age 90 with a traditional IRA. As designated beneficiary his adult son, Russell, can take annual RMDs from the IRA because Dave died before the SECURE Act became effective.

Russell dies in 2020. His son Theodore, the successor beneficiary, is subject to the SECURE Act and the 10-year rule, and must also take RMDs based on Russell’s single life expectancy during years 1-9 of the 10-year period. However, Notice 2022-53 said that if Theodore failed to take his 2021 or 2022 RMD, there would be no penalty. Notice 2023-54 extends this relief to 2023 RMDs. Beneficiaries who inherited a Roth IRA do not need this relief. Under the IRS proposed regulations, anyone who inherits a Roth IRA is deemed to have inherited from a person who died before his RBD. This is because Roth IRA owners are not subject to lifetime RMDs. Most Roth IRA beneficiaries are still subject to the 10-year rule, but RMDs are not required for years 1-9.

 

Does Notice 2023-54 waive all RMDs for 2023?

No. The Notice doesn’t affect lifetime RMDs, inherited IRAs by eligible designated beneficiaries (EDBs), or RMDs by beneficiaries who inherited before 2020.

Example: Monica has an IRA. She is 80 years old and must take a lifetime RMD for 2023. If Monica fails to do so, Notice 2023-54 doesn’t provide any relief from the penalty.

Example: Arthur inherited an IRA from his mother in 2018. Arthur has been taking RMDs each year based on his single life expectancy. Because he inherited prior to the SECURE Act, Arthur can continue the stretch. However, if he fails to take an RMD in 2023, Notice 2023- 54 does not relieve him from the penalty.

 

Should every beneficiary who is eligible for the IRS relief skip their RMD for 2023?

Anyone who is eligible for this relief also has the 10-year deadline looming. So, while it may be tempting to skip an RMD for 2023, that could mean more pain later when a big tax bill comes due at the end of the 10-year holding period.

 

Does the recent guidance tell us what will happen with RMDs during the 10-year period in the future?

The IRS is not tipping its hand. The latest notice says, “Final regulations regarding RMDs will apply for calendar years beginning no earlier than 2024.” Hopefully, those final regulations will arrive sooner rather than later and offer clear direction.

 

Which IRA owners get more time to complete a rollover?

While Notice 2023-54 mainly addressed RMD confusion during the 10-year rule for beneficiaries, it also provided very targeted relief to a specific group of IRA owners — those born in 1951. The Notice extends the 60-day rollover deadline for these IRA and plan account owners affected by the SECURE 2.0 increase in the first RMD age from 72 to 73.

Under the old rule, the first RMD year for account owners born in 1951 would have been 2023. Under SECURE 2.0 it is now 2024.

Some IRA custodians and plan administrators inadvertently paid out “RMDs” in 2023 to these people. Because these weren’t technically RMDs, and the account owners may not have wanted them, the IRS gives these account owners additional time (beyond the usual 60-day period) to roll back distributions received between January 1, 2023, and July 31, 2023. The extended deadline is September 30, 2023.

Such a rollover will not violate the once-per-year IRA rollover rule if another distribution was received by the individual in the last 12 months that was also rolled over. It will start a new 12-month period that will preclude a distribution received in the next 12 months from being rolled over.

Example: Mick reached age 72 in 2023. He was unaware that SECURE 2.0 delayed the RMD age to 73. On January 10, 2023, he took a distribution from his IRA, believing he needed to take an RMD for 2023. Mick realized his error a few weeks later. Mick has until September 30, 2023, to roll over this distribution if he so chooses. If Mick had already done a rollover of another distribution received in the last 12 months, that will not preclude him from rolling over the 2023 RMD distribution “mistake.” However, going forward, any distribution Mick takes from any IRA before January 10, 2024, will not be rollover eligible.

Membership in Ed Slott’s Elite IRA Advisor Group™  is one of the tools our advisors use to help you avoid unnecessary taxes and fees on your retirement dollars. Gordon attends in-depth technical training on advanced retirement account planning strategies and estate planning techniques. And semiannual workshops analyzing the most recent tax law changes, case studies, private letter rulings, Congressional action and Supreme Court rulings help keep attendees on the cutting-edge of retirement, tax law and IRA distribution planning. Through his membership, Gordon is immediately notified of changes to the tax code and updates on retirement planning, and he has 24/7 access to Ed Slott and Company LLC to confer with on complex cases.

This information, developed by an independent third party, has been obtained from sources considered to be reliable, but Raymond James Financial Services, Inc. does not guarantee that the foregoing material is accurate or complete. Changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Copyright ©2023, Ed Slott and Company, LLC Reprinted from The Slott Report, August 14, 2023 with permission. https://www.irahelp.com/slottreport/rmd-relief-no-thank-you. Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article. Raymond James is not affiliated and does not endorse Ed Slott and Company, LLC, The Slott Report, The Elite Advisor Group™, or Sarah Brenner, JD.

CSP #328338 Exp 11.7.24

Are you Retirement Ready?

Oct 31, 2023 | Estate Planning, Retirement Planning

Are You Retirement Ready?

When it comes to living the life you imagine in retirement, the earlier you prepare, the better your chances of reaching your goals. Just like planning a wedding or building a new home, there are a lot of decisions to make and variables to consider.

Find out where you stand with our Retirement Readiness Checklist. Don’t panic if you’re just getting started or have a lot left to do. Our team’s step-by-step process, the Cornerstone Experience®, provides one-on-one attention and guidance to help you enjoy life today and take care of the people you care about for the long-term.

FINANCIAL

Where will your monthly retirement income come from?

79% of workers plan to keep working in retirement, while 34% of retirees actually do work in retirement.1

Work $_________
Assets $_________
Social Security $_________
Insurance $________
Pensions $_________
Other (inheritance, etc.) $_________

 

Do you know how much you’ll need for living expenses when you retire?

I know what my monthly essential expenses will be: $_________
I know what my monthly extra expenses will be: $_________

 

Do you have a contingency plan to take care of yourself and those you love if you can’t work as long as you intend to at your current position?

46% of retirees leave the workforce earlier than planned because of a hardship, such as a health problem or disability. Another 31% say they retired due to changes at their company.1  

Yes
No

 

How will you handle healthcare costs?

While it’s impossible to precisely predict out-of-pocket expenses, a retired couple can easily spend $10,000 a year above and beyond what’s covered by traditional Medicare.2

Medicare
Long-term care insurance
Health Savings Account (HSA)

LEGACY

Are you planning to provide for others or do any charitable giving during your retirement or after you’re gone?

College fund for heirs
Gift to charitable organization(s)
Inheritance

Which essential documents do you have in place to ensure your wishes are carried out if something were to happen to you?

Trust
Living will
Power of attorney
Medical power of attorney
Will
Ethical will
Personal property memorandum or disposal list
Organized records, including contact information for your attorney, wealth advisor, tax advisor, etc


Are you planning to provide for others or do any charitable giving during your retirement or after you’re gone?

 College fund for children/grandchildren
 Leave an inheritance
 Gift to charitable organization(s

 

Have you communicated your wishes to the people responsible for carrying them out?  

Guardian
Executor
Family

LIFESTYLE

What will you do with your time?

 Travel
 Work part time
 Volunteer
 Spend time with grandkids
 Master a hobby or start a new one
 Take classes or go back to school
 Keep doing activities I’m currently doing

Is there anything you’ve always wanted to do “if you had the time” or if money was no object?

Have you always wanted to own your own plane? Do you feel called to volunteer building housing in Rwanda? Did you miss your true calling of being a kindergarten teacher or university professor? Lawyer or social worker? Anything is possible with the right plan and support! ______________________________________________________

___________________________________________________________

Who will you spend your time with?

 Current group of friends
 Plan to meet new friends
 Continue attending professional groups I’m involved with
 Join a new organization
 Time with family will keep me busy

Download The Questionnaire

The pdf opens right away after you enter info and hit “Download the Questionnaire.”


1 2023 Retirement Confidence Survey, Employee Benefit Research Institute and Greenwald Research
2 Ready to Transition to Retirement, Raymond James, March 2019

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Your Plan Can Create Meaningful Outcomes In Your Life

Our team will analyze your income needs for today and tomorrow, then help you develop and implement a plan to help you achieve the life you’ve imagined in retirement.

Retirement Planning

Gain confidence with goal setting and monitoring, comparing scenarios to understand how factors impact your plan.

Estate & Charitable Planning

A basic understanding of estate planning can help you preserve your assets, take care of the people who are important to you, potentially reduce taxes, and avoid common mistakes.

Tax Planning Strategies

Keeping your tax liability to a minimum is an essential part of maintaining your Cornerstone financial plan.

Investment Management

Our advisors will help design a strategy that is clearly defined, matches your goals, and aligns with your risk preferences and lifestyle.

Risk Management / Insurance Planning

We use best financial practices, built on an industry-renowned framework, to help us understand YOUR acceptable levels of risk-and-reward with unparalleled accuracy.

Hear Directly From Our Team

Shelby Bierema Client Relationship Manager

❝

I was immediately drawn to the team and atmosphere at Cornerstone. With my first step in the door, I felt accepted, seen, and valued. I am proud to be part of an organization that truly believes in placing people over profit.

Shelby Bierema, FPQP®                                      Manager of Client Relations

Andrew Ulvestad AAMS Wealth Advisor Financial Planner Sioux Falls, Huron, SD

❝

It wasn’t about sales; it wasn’t about money. Cornerstone displayed a genuine love for their clients and I knew it was something I wanted to be a part of.

Andrew Ulvestad, AAMS®                                      Wealth Advisor

Hear Directly from Our Clients

“Gordon, you have built an outstanding organization, and have selected qualified professional employees to serve your clients. The hallmark to your success is dedication, honesty, integrity, trust and your personal faith. Your leadership has established for your clients a sense of pride and belonging to your organization. Pauline and I will always be grateful for what you have done for us during our retirement years. We are grateful to you for being our Financial Advisor and friend during the past 20 years.”

 

~Eldon and Pauline Nelson, Clients since 1999

The statement is a testimonial from current clients as of March 13, 2023, and may no longer be applicable or a client. No compensation was paid in exchange for the testimonial, it was not solicited by the advisor, and client consents to use of this testimonial in the advisor’s advertisements.

The testimonial is not representative of all client’s experience with the advisor, not based on performance, and not a guarantee of future performance or success. Investing involves risk and isn’t always profitable.

The advisors at Cornerstone Financial Solutions, Inc. provide an outstanding client experience and integrated, full-service financial planning in a family-like culture. The practice focuses on client education and coaching with frequent reviews to help ensure clients are on-track to realize their financial goals.

The unparalleled level of service is best suited for those with a minimum of $500,000.00 in investable assets, who want to work with a fiduciary specializing  in comprehensive financial planning.

The Cornerstone team has over 140 years of combined team experience and 30 years in business, and is backed by the power of Raymond James, one of the top financial institutions in the US.

Learn more about The Cornerstone Experience®.