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livingdebThat's a very exciting title for a book that is really just about minimizing taxes on your IRAs and other retirement plans.
The main thesis is that there are rules for when you may and when you must withdraw money from your retirement accounts. For example, if you wait until after you're 70.5 years old to start withdrawing money from your regular IRA, or you don't withdraw at least the minimum, then you will get socked with a federal income tax of 50% of all the money you should have taken but didn't.
The audience for this book seems to be people who save a lot of money in their retirement plans, but want to leave all that money to their children. They would never retire early (because that's idiotic) unless they were laid off and couldn't get another job or they became disabled. They need to be careful because each parent can leave only a million dollars to each kid tax-free. This audience is not me.
Nevertheless, I did learn some good things from this book.
1) Whenever you switch jobs, roll your retirement money over into an IRA (through direct transfer). This way you have more options on how to invest and in most cases less stringent rules about how to use the money. Also, you don't have to worry about your company staying in business or being polite to you when you no longer work there.
2) You can split your IRAs into multiple IRAs. This is good for if you decide you want to withdraw money early, using the substantially equal payments method, but you don't want the amount calculated on your entire IRA because you don't need that much money. So you break it up into two IRAs, one of which you take the payments from, and one of which stays intact.
Splitting up your IRAs can also come in handy if you want to leave your IRA to several children--things go more smoothly if they each have their own IRA instead of a fraction of one. They can split the IRA themselves after the owner's death.
I'm getting less and less impressed with retirement accounts. I like my Roth IRA--I can get out all the money I put in at any time, and as for the growth in the funds, even that can be extracted either after age 59.5 or by taking substantially equal regular payments (as I might want to if I were retiring early). But just saving money yourself is very similar except that you pay taxes on your dividends and capital gains. These taxes are much lower than income taxes, so not such a really big deal.
Here's my favorite part of the book, a "true story":
I'm afraid that last line may stay with me for some time. (Even though they could also have given it to recipients who would not piss away the money.)
The main thesis is that there are rules for when you may and when you must withdraw money from your retirement accounts. For example, if you wait until after you're 70.5 years old to start withdrawing money from your regular IRA, or you don't withdraw at least the minimum, then you will get socked with a federal income tax of 50% of all the money you should have taken but didn't.
The audience for this book seems to be people who save a lot of money in their retirement plans, but want to leave all that money to their children. They would never retire early (because that's idiotic) unless they were laid off and couldn't get another job or they became disabled. They need to be careful because each parent can leave only a million dollars to each kid tax-free. This audience is not me.
Nevertheless, I did learn some good things from this book.
1) Whenever you switch jobs, roll your retirement money over into an IRA (through direct transfer). This way you have more options on how to invest and in most cases less stringent rules about how to use the money. Also, you don't have to worry about your company staying in business or being polite to you when you no longer work there.
2) You can split your IRAs into multiple IRAs. This is good for if you decide you want to withdraw money early, using the substantially equal payments method, but you don't want the amount calculated on your entire IRA because you don't need that much money. So you break it up into two IRAs, one of which you take the payments from, and one of which stays intact.
Splitting up your IRAs can also come in handy if you want to leave your IRA to several children--things go more smoothly if they each have their own IRA instead of a fraction of one. They can split the IRA themselves after the owner's death.
I'm getting less and less impressed with retirement accounts. I like my Roth IRA--I can get out all the money I put in at any time, and as for the growth in the funds, even that can be extracted either after age 59.5 or by taking substantially equal regular payments (as I might want to if I were retiring early). But just saving money yourself is very similar except that you pay taxes on your dividends and capital gains. These taxes are much lower than income taxes, so not such a really big deal.
Here's my favorite part of the book, a "true story":
An elderly couple came to my office after seeing me at a seminar on estate planning. They were 78 and 79 years old, respectively, and not in the best of health. They had a $6 million estate and had done no estate planning. I first told them, "Give some money to your kids." That was a mistake. As soon as I said it, the old man turned into what I can only describe as a geriatric version of the Incredible Hulk. He somehow corralled all the strength in his infirm little body and shouted angrily, "Give it to my kids? They'll just piss it away!"
I sat quietly for a second, giving him a chance to calm down. Then I looked him in the eye, and said, "here's the way it is. You either give it to your kids, you spend it, or you give it to the government. You pick the pisser!
I'm afraid that last line may stay with me for some time. (Even though they could also have given it to recipients who would not piss away the money.)