Really like the accompanying thread on CC “helping family elders with estate planning, wills, …”
This ties in so much with all the thoughts with retiring, structuring things for travel plans or how to spend time and resources in retirement. Now that we are a few years into retirement, since we plan to live in our state for quite a while yet, thoughts about our wills (which we have) and what we want to do on estate plan. Just received in the mail a local seminar given at our public library – the 3 hosts include a lawyer. Will give us information from their perspective.
I have a somewhat technical question. DW has a 401(k) that holds a lot of highly appreciated stock. The plan was to roll it into an IRA, until I read about a trick where, instead of doing a rollover, you take a distribution and pay the tax, but rather than the entire distribution being ordinary income, only the initial contribution and company match are ordinary income, and the capital gains are all taxed as LTCG. There’d be no early withdrawal penalty and she’d lose out on future tax deferral, but the thought of paying 15% tax now is tempting.
So the question is, could she rollover into an IRA and play the same game later, or must it be done from the 401(k)?
I’ll take a moment to explain this for the benefit of anyone who might be able to utilize this strategy.
The IRS allows special treatment for company stock held within a 401(k).
The ideal candidate is someone who didn’t diversify and has a lot of stock in the company they worked for, the stock has greatly appreciated, is at or near retirement age, and is comfortable paying a little tax now for big savings later.
Basically you take a distribution of the company stock into a personal brokerage account and pay tax on your basis in the stock. Then you’re free to sell the stock whenever you want and pay tax at long term gain rates, as opposed to the ordinary income rates you’d otherwise pay on a 401(k) or IRA distribution. So 0%, 15% (most people) or as high as 20%, as opposed to 10-39%, or whatever the top rate is in the future.
Does “company” mean the current employer whose stock is purchased using contributions to the current employer’s 401(k)?
I can see why this can get a favorable tax treatment. Generally, not the retirement investment strategy advised by financial pros. One can lose both the job and their retirement funds if the company goes under.
Or KMart. DW practiced pharmacy there for a few years, and watched some stock go down the drain.
OTOH, 5 years at Walmart with max contributions and matches, and 20 years of strong appreciation is working out well. And converting it to LTCG is a fortuitous surprise.
It’s funny, we never gave this 401(k) much thought at all.
We’ve been converting our IRA’s to Roth’s for several years now, mostly at the 24% rate. To get a chance to harvest retirement money at 15% (or 0% if we play our cards right) seems like manna from heaven.
I believe upthread there’s a discussion about living independently as long as possible in the later years of retirement (to delay need for full-time care/institutional care which is incredible expensive).
Interesting article on the topic …
I’m hoping in a few years this type of thing will be even more integrated, streamlined, adoptable…
I’d like to get a smartlock on at least one of our doors. But first we need to get them aligned better. That’s my biggest beef when my husband goes away … I have the hardest time getting the deadbolts engaged.
My biggest fear with my aging mother was her forgetting to turn off her electric stove and burning down the house. Hope some smart heads are working on making a solution…
One solution that I have come up with is to figure out what my mom was using her electric burners for. Boil water? Got her to start using the microwave for that. I just bought her something that steams eggs and shuts off automatically, my sister got her a rice cooker for her oatmeal. There should be no reason for her to use the burners any more. These are very simple to use. I also just bought her a simple measuring cup and wrote down easy instructions, hope she does this and stops using those burners!
The stove was unplugged at MILs house because she kept putting flammable things on the surface and turning it on.
Her “cooking” was done in a microwave and one of those hot water boiling electric pots (for soup, oatmeal, tea, hot chocolate).
She now has help every day and they cook…so the stove is plugged in. All the other small appliances are not!
Another way to keep the stove from being turned on is to take the knobs off and put them someplace where those who plan to use the stove can get them, but the elder can’t.
Electric Kettles are great too. I use mine throughout the day.
For a senior you’d want to take a look at the design, weight, and how it pours. My first was a Hamilton Beach, which was perfectly fine. Then I had a higher design one from Target and the spout was problematic. Now I have a Smeg, which is great, but quite heavy.
don’t forget some sort of water/moisture monitors. FIL’s partner (upper 80’s) has been known to leave water running. She was out all day and returned to find the Super knocking on teh door as water had over-flowed their kitchen sink and seeped thru the floor/ceiling of the condo below them.
What is the definition of a “senior”? I leave my pot on the stove not infrequently. Ruined quite a few pots and kettles. Finally, bought an electric kettle that turns off itself.
