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How to divide retirement money between spouses?

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  • #16
    When we are both retired because we are too feeble to work, our taxes will be in the lowest bracket anyhow. Usually, we are at around 5-6% at this point. Probably one of the 'poorest' folks on this forum. I may sound silly, but at this point, I want to see how much each of these accounts can get to. I guess I want to see how well I did as an investor, and yes, I know that being a good investor means looking at everything. But from profits from my business and reinvested dividends, I think I did pretty good. My Roth IRA mutual fund has bounced back from a lot of the slaughter from the last few weeks so my account is over $13K currently. And pretty much all from little dribs and drabs of profit, and some months didn't have much in the way of profit. I know it isn't a lot, but I hope you can see why I want to see what it gets to before I have to tap any of it.
    Gailete
    http://www.MoonwishesSewingandCrafts.com

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    • #17
      Gailete,
      It is hard to comment without knowing your entire tax situation--so I'll ask a question: Do you and your spouse qualify for a savers credit?

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      • #18
        Offhand I can't remember, I don't think so because of the small amount that we saved, but I'm not sure. I remember something about and filling in the forms on Turbo Tax. I did qualify for the property tax rebate last year. Using TT they walk you through any potential savings or credits, etc. My brain is usually fried by the time I am done with taxes as I do two businesses, one rental (this will be our last year for it), personal, and the estimated value of items that I get from the Amazon Vine program. So I can't remember about that, but I know it came up. We are in a tax class unlike most of the folks here, and I have seen it all along. Just being in a lower tax class doesn't mean that we just shrug our shoulders and hope someday if needed the government will help us out. Many of the folks making the new tax laws such as the saver's credit are making 3-4 times (if not more) what we make yearly and they are begging for raises. They don't get the fact that yeah some things sound like nice programs unless you don't have the money to take advantage of them in the first place. I got a raise for this year. Yippee! $39! Of which some will go to my MC supplement that went up and my drug program that went up, and by the time you are done, it doesn't feel like you got much of anything. There doesn't seem like much available for the poor to help them climb out. We don't live 'poor' as my mother, who was very poor' trained us well. Just because you are broke doesn't mean you go around dirty and with messy hair and torn clothing. And the big one in my book, you don't go around wrecking the place you are renting!

        Not really looking for tax advice per se as, at this point, I don't think I am missing anything. I may be doing things in a different way than others might, but I have my reasons. I am very careful to try and keep up with anything that is applicable to our situation as well as the things that should be but aren't, like the Medical account if you have the high deductible insurance. We don't have the high deductible, but as people that are self-employed not only do we pay our premiums, but also the co-pays, etc. like others have to. We also have to pay our share of SS and the employers share. I still remember when all your medical costs were allowed to be taken off your taxes, not just a certain % of our income. That way things, like going to the dentist when needed or getting new glasses when needed, were basically deductible. Now only if you go over a certain amount depending on your income. When I was still working I was part of a team that checked nursing homes to be sure that they were doing their documentation correctly and billing Medicare correctly (my part). We always joked although it wasn't a joke, that MC didn't care if you could hear, eat or see. They didn't cover glasses, dentures or hearing aids unless somehow they were shown to be medically necessary. In reality, they are very necessary for good nutrition, being able to function with their peers because they can see and hear them (thus preventing depression) as well as preventing falls because they could see something that was in their way. Lots of reasons. For those coming into a nursing home with financial backup or kids willing to help pay for things, it was one thing. For those that had no family left who had nothing but a small SS check, they did without or depended on the charity of others as the home would take their whole SS check and any other monthly pension or whatever up to the daily rate of the home and at the time I was still working those folks had $30/month 'spending'' money to do things like get their hair done/trimmed, etc., buy clothing, shoes, treats. Many of those that enter nursing homes are not there for a real long term, A home I worked at in 1989 had a married couple there. I was shocked a few months ago when the man died. and just this past week his wife did. They were there before I started working there, but that meant they had been in a nursing home for 30+years! Every bit of their assets had to be tapped out at that point.

        Gailete
        http://www.MoonwishesSewingandCrafts.com

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        • #19
          Sorry, I forgot to provide the link.

          Here is a link that has the parameters for the savers credit. https://www.bogleheads.org/wiki/Saver%27s_credit





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          • #20
            Thanks and now I remember why they won't let us take it. My ex retired about the same time I had to go on disability. Part of our divorce agreement required that I get a certain portion of his pension and since he is retired, I get my $94 monthly and so do not pass the 'test'. If and when he kicks the bucket it goes up to almost $300 assuming his pension plan hasn't utterly collapsed. I get letters every year saying how bad things are and what they are doing to 'fix' things.

            "The saver's credit can be reduced or the taxpayer rendered ineligible for the credit if a taxpayer (or taxpayer's spouse if filing a joint return) receives a distribution from a qualifying retirement plan. "

            I knew I had heard of it and our income is so low we should surely have been able to get it, but for the last few years, I was the only one contributing to my Roth IRA and getting the pension. Maybe this year under his name he will qualify.
            Gailete
            http://www.MoonwishesSewingandCrafts.com

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            • #21
              Gailete,
              That is too bad about the saver’s credit.

              Well, the next thing is to figure out if it should be Roth or traditional. For this, you do have to think about the long game tax wise. The big question for traditional is will you be able to take distributions at a lower tax rate than the tax break you get now (if you are able to make it a deductible contribution)? Also, will distributions taken later on cause your social security to be taxed?
              If your DH doesn’t have a Roth— he is going to have to have it for 5 years to “qualify” it. Once qualified, It will allow the earnings to be taken out after 59.5 tax free and penalty free (contributions can always be taken out without penalty). One interesting thing is if he has any IRA tax advantaged space left for 2018– he can still make a contribution (until 2018 taxes are due) and the Roth qualification clock starts ticking starting with 2018.

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              • #22
                true depends on how much in income you are making now? Doesn't sound like a lot. so a roth might be the way to go if you are basically in the 10% bracket. Plus it will allow you to not be taxed when you draw it down on your SS in the future.
                LivingAlmostLarge Blog

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                • #23
                  I put the big chunk from the sale into our regular IRAs. About 2 weeks later I told hubby what they were worth and he questioned why his was smaller. Simply from something I had signed him up for, or at least I thought I had and that was having paperless reports. Two years later when I realized it, I got him signed up but at that point, they had tapped his account $50 total and over the years that difference keeps getting bigger! As I am 9 years older, it will be a while until he can tap his account and If I die first, he isn't going to have enough coming in to even hardly bother making up a tax return! Most income coming in is mine and dies with me except my IRAs and savings accounts which would then be his.
                  Gailete
                  http://www.MoonwishesSewingandCrafts.com

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                  • #24
                    Originally posted by Gailete View Post
                    I am 9 years older than my husband. Because of that I always figured that I should put what we had to put towards retirement into my account first and if more then into his. We have ever put in as much as one person is allowed. I'm 63 so technically can tap my retirement accounts any time. He is 54 so not yet able to pull anything out without penalty. Not that we want to be taking anything out yet, knowing if needed we could is better than paying a fee because what we need is in his account. He also has to wait to 67 to retire on full SS. I have some money that I want going into the retirement accounts and I can't decide if I should dump it all in mine, divide it equally or what. Looking for ideas at this point to what makes the most sense. As much as possible I want those accounts untouched for as long as possible.
                    The solution is in the details of the plan and execution.

                    Scenario 1- one spouse will retire while the other works. In this case, the retired spouse needs assets to generate income, however with a second income coming in, this means (possibly) that money can compound longer.
                    Scenario 2- both spouses retire at approximately same time. In this case having more assets to younger spouse delays RMDs in tax deferred accounts, so if one account has drastically more than the other, I could debate that the younger spouse with the most assets saves the most taxes over long run. If the older spouse has more money in accounts, check the withdraw rules on inherited IRAs to discover other risks on when money needs to be withdrawn.
                    Scenario 3- one spouse has more Roth money than the other. Roth withdraws are tax free, and also inherit differently. The longer a Roth can compound, the more valueable it is. Try retiring on tax deferred money or other income while the Roth account grows. Draw down Roth account last, if possible.

                    It is possible one family has all 3 scenarios- which is why you need to look at details and decide how to execute the plan. It doesn't need to be perfect, just take advantage of the scenario you have at your disposal.

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                    • #25
                      Originally posted by jIM_Ohio View Post

                      The solution is in the details of the plan and execution.

                      Scenario 1- one spouse will retire while the other works. In this case, the retired spouse needs assets to generate income, however with a second income coming in, this means (possibly) that money can compound longer.
                      Scenario 2- both spouses retire at approximately same time. In this case having more assets to younger spouse delays RMDs in tax deferred accounts, so if one account has drastically more than the other, I could debate that the younger spouse with the most assets saves the most taxes over long run. If the older spouse has more money in accounts, check the withdraw rules on inherited IRAs to discover other risks on when money needs to be withdrawn.
                      Scenario 3- one spouse has more Roth money than the other. Roth withdraws are tax free, and also inherit differently. The longer a Roth can compound, the more valueable it is. Try retiring on tax deferred money or other income while the Roth account grows. Draw down Roth account last, if possible.

                      It is possible one family has all 3 scenarios- which is why you need to look at details and decide how to execute the plan. It doesn't need to be perfect, just take advantage of the scenario you have at your disposal.
                      Yes, I have looked at those things, but since I am not only the older spouse by 9 years, I am also the one that is bringing in more money. However, We do not have oodles of money in any of our accounts at this point. Maybe with being even more frugal than usual, we could stretch all we have in our retirement accounts currently to be able to make up the shortfall in my SS for about 4 years plus the money in savings currently from the sale of the rental property will get us to 6-7 years. Which is what our on line business has been doing. I am physically caput so the important things is he won't be allowed to get full retirement until he is 67 he has about 13 years to go until he can/ or actually should withdraw money from his IRA. But who knows what will happen? I am always surprised when they talk about the average American doesn't have anything saved for retirement and I realize that we have it saved. What is even more surprising and something I want to encourage people here with (the ones than have nothing saved), All of our retirement plans and stock portfolio as well as savings have ALL come about since we got married 17 years and I got sick and unable to work within 6 weeks of the wedding! That included 6 months of Short term disability and then nothing in the way of income for me for almost 2 years until SS approved me.

                      When you are basically poor like we are, we have a lot more things to consider. I can tap my accounts now without a penalty, he can not and the last thing I want to do is waste IRA money on paying a penalty! Things are looking much better now than a few years back.
                      Gailete
                      http://www.MoonwishesSewingandCrafts.com

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                      • #26
                        Originally posted by Gailete View Post

                        Yes, I have looked at those things, but since I am not only the older spouse by 9 years, I am also the one that is bringing in more money. However, We do not have oodles of money in any of our accounts at this point. Maybe with being even more frugal than usual, we could stretch all we have in our retirement accounts currently to be able to make up the shortfall in my SS for about 4 years plus the money in savings currently from the sale of the rental property will get us to 6-7 years. Which is what our on line business has been doing. I am physically caput so the important things is he won't be allowed to get full retirement until he is 67 he has about 13 years to go until he can/ or actually should withdraw money from his IRA. But who knows what will happen? I am always surprised when they talk about the average American doesn't have anything saved for retirement and I realize that we have it saved. What is even more surprising and something I want to encourage people here with (the ones than have nothing saved), All of our retirement plans and stock portfolio as well as savings have ALL come about since we got married 17 years and I got sick and unable to work within 6 weeks of the wedding! That included 6 months of Short term disability and then nothing in the way of income for me for almost 2 years until SS approved me.

                        When you are basically poor like we are, we have a lot more things to consider. I can tap my accounts now without a penalty, he can not and the last thing I want to do is waste IRA money on paying a penalty! Things are looking much better now than a few years back.
                        How much did you save in 17 years gailete?
                        LivingAlmostLarge Blog

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                        • #27
                          Originally posted by LivingAlmostLarge View Post

                          How much did you save in 17 years gailete?
                          In all accounts including retirement ones, over $86K but almost $20K is part from the rental house sale and $51K from IRA and investments that I refuse to touch until absolutely forced by circumstances to do so. On our income we do without a lot as it is, but by being even more frugal, I have been able to tuck money away. Some months I was doing good to send $30-40 off to be invested! I suspect many would think that isn't an amount worth saving or bothering about and just go to McD's for dinner instead of saving it. The thrill of going over $50K a few weeks ago was unimagineable. I would like to get it to $100K if at all possible before I 'retire' not that I'm not already retired already.
                          Gailete
                          http://www.MoonwishesSewingandCrafts.com

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