Suze: September 1st. Oh my God. September 1st 2024. Welcome everybody
Suze: to the Women and Money podcast as well as everybody
Suze: smart enough to listen, Suze O, here and today obviously
Suze: is Suze School. But before I begin Suze School, I
Suze: really have to commemorate today
Suze: because one year ago today,
Suze: our very, very good friend, Jimmy Buffett passed away and
Suze: many of you wrote and said that you were so
Suze: surprised that you never heard me say anything or talk
Suze: about it. And honestly, it's because it was too painful,
Suze: it was too painful to even think about. And as
Suze: I'm recording this, his daughter, Savannah Buffett
Suze: and her husband, Josh happened to be here on the
Suze: island because this was one of Jimmy's absolute favorite place
Suze: to be. And I would ask Savannah to come on
Suze: the podcast and say something, but it's still too, too
Suze: painful for herself as well.
Suze: So today is a very incredible day
Suze: and a day that physically ended a life one year ago,
Suze: but a memory of a man and his songs and
Suze: his joy and his parrot heads and his Margaritaville that
Suze: will go on forever and a day, Jimmy, what can
Suze: I say? Boyfriend? Um What can I say? But in
Suze: that topic as well, I just wanna say that about
Suze: a week or so ago,
Suze: a woman by the name of Ruth sent in an
Suze: email and she said the following said Suze, I'm finding
Suze: your podcast very depressing because all you do is talk
Suze: about death. Can't you talk about life or something else
Suze: or whatever she said.
Suze: And I simply wrote her back one little line. That
Suze: death is a part of living. It just is whether
Suze: you know it or not and not one of us
Suze: can escape that.
Suze: But what makes death for me so sad is when
Suze: there hasn't been planning done for it.
Suze: So, yeah, I spend a lot of time talking about it,
Suze: knowing the rules, understanding why you need a will, understanding
Suze: why a will is never enough. And you also need
Suze: a living revocable trust, an advanced directive and durable power
Suze: of attorney for health care and a financial durable power
Suze: of attorney. Why you need to know many, many things,
Suze: especially as you get older,
Suze: how to take money, not only out of a retirement account,
Suze: but especially if you die and it's not an if
Suze: it's a win, what's gonna happen to that money that's
Suze: in your retirement account because probably for the majority of you,
Suze: the most money that you have, forget your home, the
Suze: most money, liquid money that you have is in your
Suze: retirement accounts. And now that the Secure Act 2.0 has
Suze: been finalized, the regulations for it. It is essential that
Suze: you know, that your beneficiaries know the correct way to
Suze: take money from a retirement account
Suze: that they have inherited because it is no longer like
Suze: it used to be. And in 2020 if you died,
Suze: then or after
Suze: everything has changed. So today is going to be
Suze: the start of part one of the final master class
Suze: on inheriting pre-tax retirement accounts.
Suze: There will be a part two, you'll participate in part
Suze: two and I'll tell you how in a little bit,
Suze: but this will be the master class because the final
Suze: regulations are in. And so anything I've told you about
Suze: it before, even though it's been correct, this now is
Suze: absolutely what you need to know.
Suze: So, are you ready to take out your Suze notebooks?
Suze: Which you should absolutely do
Suze: and get ready for part one of the master class
Suze: on pre-tax traditional retirement accounts.
Suze: All right.
Suze: So to begin with, I'm going to do a refresher
Suze: of all the different categories that people who can inherit
Suze: in IRA. And when I say IRA, I also mean
Suze: a 401k, a 403bs, TSPs.
Suze: But chances are you are going to want to, if
Suze: somebody has money in a planned retirement account, meaning a
Suze: 401k 403b or TSP, chances are you are going to
Suze: absolutely want to take that money and roll it over
Suze: into an inherited IRA. So if it's ok,
Suze: I'm just going to refer to all plans now as
Suze: an IRA. Ok, so again to pick up where I
Suze: just left off, I wanna do a refresher of all
Suze: the different categories that people who inherit an IRA fall into.
Suze: Especially remember I'm now talking about pre tax retirement accounts.
Suze: As you know,
Suze: when you have a retirement account,
Suze: you have to designate who you want to receive that
Suze: retirement account in case you die.
Suze: So it is a beneficiary, which is why throughout this,
Suze: you're going to hear me talk about designated beneficiaries because
Suze: those are the people that you have designated in most
Suze: cases as to who is going to get your retirement account.
Suze: Next. You need to know that some designated beneficiaries have
Suze: more privileges than other designated beneficiaries. And therefore, we're gonna
Suze: have two categories of beneficiaries. The very first one that
Suze: has more privileges are known as eligible, designated beneficiaries
Suze: to break those three words down. Very simply, it's your
Suze: designated beneficiaries that are eligible for more withdrawal privileges than
Suze: anybody else. Ok.
Suze: Now who is qualified as an eligible designated beneficiary?
Suze: Number one, a surviving spouse, your surviving spouse has the
Suze: most privileges of any other beneficiary. You can leave your
Suze: money to and that a surviving spouse can take over
Suze: your retirement account as if it was their own. They
Suze: have all the benefits in the world. So we're not
Suze: worried about surviving spouses. But the four other categories
Suze: of an eligible designated beneficiary is a minor child of
Suze: the decedent, not just any minor child, but it has
Suze: to be a minor child of the decedent, the owner
Suze: of the retirement account, very, very important.
Suze: The next category is people, doesn't have to be a relative,
Suze: but any person that you have left as a beneficiary
Suze: who is less than 10 years younger than the decedent
Suze: or older than the decedent.
Suze: So you have a decedent who named their best friend
Suze: as a beneficiary. The decedent was 80 years of age
Suze: when the decedent died. The beneficiary, his best friend is
Suze: maybe 75 which is less than 10 years younger than
Suze: the decedent or
Suze: the decedent is 80 years of age, left his best
Suze: friend
Suze: as beneficiary and his best friend is 82 years of age.
Suze: It's in those circumstances that that person is an eligible
Suze: designated beneficiary.
Suze: People who are chronically ill and I will get more
Suze: into that later on as to how do you verify
Suze: that you are chronically ill and things like that as
Suze: well as the fourth category you are disabled
Suze: again later on. I'll tell you all about that.
Suze: Those are the people
Suze: that are eligible, designated beneficiaries, but most people, everyone who
Suze: is a non spouse most likely, which will be the
Suze: majority of you are non eligible designated beneficiaries. But these
Suze: people are not eligible
Suze: for the benefits that the people I just named are
Suze: eligible for.
Suze: What you need to know. Is that how one withdraws
Suze: money from a retirement account that they have inherited is
Suze: determined by your status. You are either an eligible designated
Suze: beneficiary
Suze: or you are a non eligible, designated beneficiary.
Suze: Makes sense. Ok.
Suze: The next factor that you need to know they've made
Suze: this so difficult, I can't even stand it, but it
Suze: is now the law. So you have to know this.
Suze: Now, there is a second factor that is equally as
Suze: important that will determine how you must withdraw money from
Suze: an inherited IRA.
Suze: And it is this put a pin in that for
Suze: a second, you all know about required minimum distributions. You
Suze: all know that once you turn 73 right now,
Suze: that's when supposedly you need to start taking out required
Suze: minimum distributions from your pre-tax retirement IRA.
Suze: However, there's also something known as a required beginning date,
Suze: the RBDs where you are not required to take out
Suze: your distribution in the year that you turned 73
Suze: but you are required to begin those distributions by April
Suze: 1st of the year after you turned 73. So let's
Suze: say you turned 73 this year like I did.
Suze: Now, it makes tax sense to absolutely take out my
Suze: required minimum distribution at the end of this year. But
Suze: that required minimum distribution will be based on the ending
Suze: balance of my IRA as of December 31st 2023. So
Suze: I will take out money. Now,
Suze: however, my required beginning date to take out that required
Suze: minimum distribution is April 1st
Suze: of the year after
Suze: I turned 73. So I really do not have to
Suze: take out my RMDs until April 1st of 2025. Now,
Suze: the reason that I don't want to wait is if
Suze: I postpone my RMD until 2025
Suze: I still have to take out another RMD for the
Suze: year 2025. So it never ever, in most cases makes
Suze: sense to defer it till April 1st of the year
Suze: after you have turned 73.
Suze: So the question has to be, why do you need
Suze: to know that? Because when you inherit a pre-tax retirement account,
Suze: you need to know if the decedent
Suze: was required to be taking their RMDs. So were they,
Suze: did they die on or after their RBD date? Their
Suze: required beginning date? If the answer to that is yes,
Suze: you fall into a whole different category. If the answer
Suze: to that question is no, they died before their RBD,
Suze: then you fall into a different category.
Suze: So let's just try to break this down first. I
Suze: want you to ask yourself two questions.
Suze: Are you ineligible, designated beneficiary or not? Yes or no. So,
Suze: are you a surviving spouse, a minor child of the decedent?
Suze: Are you less than 10 years younger than the decedent
Suze: or possibly older than the decedent? Are you chronically ill
Suze: or are you disabled? Circle yes or no.
Suze: Second question.
Suze: Did the decedent die before their required beginning date? Remember
Suze: the required beginning date is April 1st after the year
Suze: when the decedent turned 73.
Suze: Yes or no.
Suze: Now listen to me closely here because this is really
Suze: where it gets interesting.
Suze: I am 73.
Suze: I am choosing to take out my required minimum distribution
Suze: this year. But my required beginning date
Suze: is not till April 1st of next year, 2025. If
Suze: I died this year.
Suze: If I died in January, February March of next year,
Suze: even if I took out my RMDs,
Suze: I died before my required beginning date.
Suze: Therefore,
Suze: if the decedent dies before their required beginning date, even
Suze: if they had taken out RMDs,
Suze: then the answer to the question, did the decedent die
Suze: before the required beginning date
Suze: matters? So if they did, then you put, yes. If
Suze: they did not, you put no.
Suze: Also remember everybody starting in 2035 RMDs will start at
Suze: the age of 75. OK.
Suze: So if you answered yes to the first question, remember
Suze: what that first question was. Am I an eligible designated
Suze: beneficiary if you answered yes to that question.
Suze: And if you answered yes to the second question as well,
Suze: which was, do you remember, did the decedent die before
Suze: their required beginning date?
Suze: If you answered yes to both those questions, then you
Suze: have the ability to absolutely choose what you want to
Suze: do with the inherited IRA.
Suze: You don't have to worry about all the things that
Suze: I'm about to talk about. You have the ability to
Suze: stretch your distributions over your entire life expectancy. If you
Suze: want to do that, you get to do what you
Suze: used to be able to do prior to 2020 when
Suze: the Secure Act came into play.
Suze: So you have all these choices, you can stretch your
Suze: distributions over your entire life expectancy, which is a big deal,
Suze: especially if you are younger. Now, remember just because you
Suze: may choose to stretch your distributions based on your life expectancy.
Suze: If you need more money than that, you can take
Suze: it out at any time you want.
Suze: But you are simply able to do something that the
Suze: majority of the people inheriting money besides a spouse, obviously
Suze: can no longer do
Suze: fabulous, right?
Suze: So if you are an eligible designated beneficiary and the
Suze: decedent died on or before the required beginning date, besides
Suze: being able to stretch it over your entire lifetime, which again,
Suze: the majority of you will choose
Suze: for whatever reason
Suze: you don't wanna do that, you don't have to, you
Suze: then just abide by the 10 year rule, which says
Suze: the money has to be wiped clean in the 10th
Suze: year after death. If somebody died, that left you, the
Suze: inherited IRA in the year 2020 it has to be
Suze: wiped clean by 2030.
Suze: If somebody left you an inherited IRA in 2024 this year,
Suze: it's gotta be wiped clean by 2034. If you choose
Suze: that method, the great part about being an eligible designated
Suze: beneficiary
Suze: whose decedent died prior to the RBD date is, you
Suze: get to choose which one of those methods you wanna
Suze: do tremendous advantage.
Suze: However, if you answered, yes, listen closely. Now, if you
Suze: answered yes, that you are an eligible designated beneficiary.
Suze: But no to the second question, meaning that the decedent
Suze: did die on or after the RBD date,
Suze: then ready, you only have one choice mandatory. You have
Suze: to stretch
Suze: the distributions over the longer of the beneficiary's life or
Suze: the decedent's life. If the decedent had already started taking
Suze: RMDs after the RBD date
Suze: and leaves the IRA to somebody who's younger than the decedent,
Suze: then that beneficiary has to stretch the distributions over their
Suze: life because it's longer.
Suze: However, let's say the decedent was 35 years of age
Suze: or 80 years of age or whatever
Suze: and left it to somebody who's 90 years of age,
Suze: then that beneficiary would have to stretch it over the
Suze: decedent's life span. So again,
Suze: if you are an eligible designated beneficiary
Suze: and the decedent died on or after the required beginning date,
Suze: then the beneficiary has to stretch it over the longer
Suze: whichever is longer of the beneficiary's life or the decedent's life.
Suze: So next, if you answer no to both questions, one
Suze: and two, you're a non eligible designated beneficiary where the
Suze: decedent
Suze: died prior to the RBD, the required beginning date, then
Suze: yours is actually pretty simple. You have one choice and
Suze: one choice only to take the money out of the
Suze: inherited IRA. And that is you are subjected to the
Suze: 10 year rule only. That's it.
Suze: Your choice. You can let it sit there for 10 years.
Suze: But by the 10th year after death, you have to
Suze: wipe it clean. You can take money out every single year.
Suze: If you want, you can do anything with it within
Suze: those 10 years. But by the 10th year, you need
Suze: to wipe it clean.
Suze: Just some advice to you. I would not let it
Suze: sit there for 10 years. Remember, these are pre taxed
Suze: accounts I'm talking about. I would not let it just
Suze: sit there for 10 years. And then all of a
Suze: sudden you have to take it out in one lump
Suze: sum
Suze: unless it was a very small, small inherited ira that
Suze: won't affect your tax bracket. So depending on the amount
Suze: of money that is in the IRA, when you inherit it,
Suze: make an intelligent decision
Suze: that if it's a lot of money take it out
Suze: every year. So by the 10th year it's gone, if
Suze: it's not going to affect your tax bracket or it's
Suze: a small amount of money, if you want to, you
Suze: can leave it in there all 10 years to grow,
Suze: tax deferred.
Suze: Next. If you answered no to question one
Suze: and if you answered no to question two as well,
Suze: then you are a non eligible designated beneficiary where the
Suze: decedent died on or after the required beginning date. If
Suze: that is you,
Suze: then you have to do two things. You first have
Suze: to stretch the distributions over the longer of the beneficiary's
Suze: life or the decedent's life, whichever one is longer chances are,
Suze: that's gonna be your life plus the account has to
Suze: be wiped clean in 10 years. You have to do both. Again,
Suze: you can take out more
Suze: during those years. You can do it any way you want,
Suze: but you have to take out at least
Suze: the amount of money according to your life expectancy over
Suze: your life or the decedent's life.
Suze: There is a third category as well
Suze: and that is called a non designated beneficiary.
Suze: Remember a designated beneficiary is when somebody actually names
Suze: a person who's going to inherit this retirement account.
Suze: A non designated beneficiary
Suze: is if the owner of the retirement account named a
Suze: charity named their estate named a non see through trust.
Suze: So they didn't designate an individual, they designated a charity,
Suze: their state or a non see through trust.
Suze: So that's known as a non designated beneficiary. And recently
Suze: a woman just wrote me and believe it or not,
Suze: I think it was her grandfather, right, designated the, his
Suze: estate to be the beneficiary of his retirement account.
Suze: Because if it's a non designated beneficiary, believe it or not,
Suze: the rules are different and you may find yourself in
Suze: a situation where somebody didn't put down a beneficiary or
Suze: they just said because they couldn't decide my estate. So
Suze: here's what applies to you. If it is a non
Suze: designated beneficiary retirement account.
Suze: If the decedent died prior to their RBDs their required
Suze: beginning date,
Suze: then you have got to withdraw that money over five years.
Suze: So a five year rule only applies to you. The
Suze: woman who wrote in said, I'm so confused. Why would
Suze: there be a difference when I'm the beneficiary of the estate?
Suze: Because they didn't name you directly. So you have five
Suze: years from the date of death
Suze: to wipe that account clean, period. Obviously, you could do
Suze: it before them. But by the fifth year after death,
Suze: they die in 2024 in 2029 that account has to
Suze: be wiped clean.
Suze: However,
Suze: if the decedent now listen to me closely here because
Suze: this is actually an advantage if the decedent died on
Suze: or after their required beginning date because again, if they had,
Suze: then she would not have to take it out over
Suze: the five years. She would be allowed to stretch it
Suze: over the decedents, life expectancy. That is how she would
Suze: have to take it out.
Suze: All right, this is what you need to know. This
Suze: is a master class on pre-tax inherited Ira S and
Suze: other retirement accounts. But chances are they're going to all
Suze: be an Ira. So now that, you know, all of this,
Suze: I need you to write in your questions
Suze: about any Ira that maybe you've inherited or that you
Suze: don't understand in regards to this topic, right? In your question,
Suze: you only have till Wednesday of this coming week to
Suze: do so. If KT chooses it, we'll answer it on
Suze: the air. However,
Suze: you have got to include, are you a non eligible,
Suze: designated beneficiary? Are you an eligible, designated beneficiary? Did the
Suze: decedent die on or after the required beginning date? You
Suze: have to tell me those things for me to be
Suze: able to answer your questions directly. You just can't say
Suze: I just inherited an IRA. I don't know what to
Suze: do with it in today's world. Now, you have to
Suze: know your situation and this master class today, I hope
Suze: has defined it very clear for you. All right.
Suze: Until Thursday, there's only one thing that I hope you
Suze: remember when it comes to money and it is this
Suze: people first, then money, then things and if you stay safe,
Suze: you stay knowledgeable, you take the time to understand
Suze: everything you need to know about your money.
Suze: You take the time to understand everything you need to
Suze: know about money that you are going to inherit.
Suze: Then guess what? You will be unstoppable.