Your IRA- Have You Forgotten Why You Got It?

 By Rick Law, Senior Estate Planning Attorney and Elder Lawyer in Aurora, IL.  Just off the Farnsworth exit of the I-88 tollway.

We spend our whole adult lives saving for our golden years… but in our last post, we looked at why spending that money on our golden years can be painful!

In my office, we have a saying: “You forgot why you got your IRA.”

Like a leprechaun who safeguards his hoard of treasure against thieves, our senior citizen clients defend their IRAs.  We have had many clients tell us with anger in their voices that “The IRS makes me take so much money out of my IRA every year!”  They have forgotten why they saved that money in the first place.

And that’s a bigger problem than it seems.

The thing is, that money is best used in ways that allow for a lower rate of taxation… one of which is to use it for medical costs, including nursing home care.

Sadly, I have seen hundreds of clients over the past few years who will spend their non-qualified money (meaning money that has been taxed and gets fewer or no benefits) and refuse to withdraw funds from their qualified funds, such as IRAs and 401(k)s, to pay for care. We’ll learn more about this in another post, but with 70% of seniors needing nursing care at some point, this is something that directly affects you even though you may be a healthy, vigorous senior at the time you read this letter.

You accumulated that money over your working years so that you could spend the money in your retirement years.

The reason to accumulate this money in a tax-deferred manner is so that when we reach our retirement years, we are able to use that money and pay income taxes at a lower rate of taxation.

Many seniors have developed a habit, over the years, of thinking about this money as “untouchable.”  And that makes perfect sense, when you’ve been socking that money away for a few decades.

If you have developed a habit of using all other sources of money except your IRA, I’m here to tell you that when spent right, it’s one of the most valuable tools in your estate plan.

Still other seniors simply want desperately to leave their IRA to their children.  Personally, I think it’s great to leave something for your kids and grandkids – as long as you’re provided for first.

After all, it only benefits the IRS more when seniors leave the money to their children (causing the money to be taken out at a higher tax rate), as opposed to the senior using that money for the things they need.  Many seniors have seldom considered the fact that if they don’t spend the dollars, it will be spent by their children after paying a higher tax rate.

As you can see, taking all of these complicated items into consideration and building a plan that best suits each individual’s goals and needs can be difficult!  That’s why my clients choose to have a trusted guide help them put a plan in place.

If you’re ready to start getting your estate in order and secure your assets for the “worst-case” scenario, please give our office a call at 800-310-3100. Your first consultation is absolutely free.  We’ll let you know what steps you need to take, right now, to protect yourself and your family.  Call now.

Sincerely,

Rick L. Law, Attorney, Estate Planner for Retirees.

Rick was named the #1 Illinois elder law estate planning attorney by Leading Lawyer Magazine. He has been quoted in the Wall Street Journal, AARP Magazine, TheStreet.com, and numerous newspapers and articles. Rick is the lead attorney for Law Elder Law, LLP, focusing in Estate Planning, Guardianship, and Nursing Home Solutions. His goal is to give retirees an informed edge when it comes to dealing with an uncertain future.  Get flexible retirement strategies that work during good times and bad, plus information on how you can save your home and assets from being used to pay for long term care.  Call 800-310-3100 for your free consultation now!

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