• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Home
  • Our Firm
    • About Our Firm
    • Attorney and Staff Profiles
  • Services
    • Elder Law And Medicaid Services
    • Estate and Gift Tax Figures
    • Estate Planning Services
    • Guardianships
    • Incapacity Planning
    • IRA & Retirement Planning
    • LGBTQ Estate Planning
    • Pet Planning
    • SECURE Act
    • Special Needs Planning
    • Trust Administration & Probate
  • Workshops
  • Resources
    • DocuBank
    • Elder law Reports
    • Elder Law Resources
    • Estate Planning Articles
    • Estate Planning Checkup
    • Frequently asked questions
      • Estate Planning
      • Frequently Asked Questions for Families Without an Estate Plan
      • Legacy Wealth Planning FAQ’s
      • LGBTQ Estate Planning FAQs
      • Trust Administration & Probate Frequently Asked Questions
    • Newsletters
    • Reports
      • Advanced Estate Planning
      • Basic Estate Planning
      • Estate Planning for Niches
      • Trust Administration
    • Top 10 Estate Planning Techniques
  • Areas We Serve
    • Crown Point
    • Dyer
    • Munster
    • Schererville
  • Contact Us
  • BLOG

O’Drobinak & Nowaczyk, P.C.

Connect with us today(219) 865-2285

(765) 767-5225

Attend A Free Workshop
Home / Estate Planning / Key Facts About IRAs and Estate Planning

Key Facts About IRAs and Estate Planning

September 21, 2020Estate Planning

IRAs estate planningIf you take the right steps in advance to feather your nest, you can put your working years behind you at some point and enjoy your golden years to the fullest. For many people, an individual retirement account will be part of the plan.

This will provide an underpinning that you can draw from when you are a senior citizen, but what happens if you don’t need the money? At some point, you may recognize that you will be in this position.

The account will then be part of your estate plan. With this in mind, we will pass along some key facts about IRAs and estate planning in this post.

Traditional and Roth Individual Retirement Accounts

Though there are some variations, the two types of individual retirement accounts that are most commonly utilized are the traditional account and the Roth IRA. The major difference between these two types of accounts is the way that they are taxed.

When you have a traditional individual retirement account, the money that goes into the account comes out of your paycheck before taxes are paid. As a result, you earn less taxable income each year while you are contributing into the account, and this gives you a break in the near term.

With a Roth IRA, the taxation works in the reverse manner. After-tax income goes into the account, so you and the IRS are always up-to-date with one another.

Penalty-Free Distributions

You can begin taking distributions without being penalized when you are 59 ½ years of age, and this applies to both types of accounts, but there are a few exceptions to the rule.

If you are buying your first house, you can take up to $10,000 out of your individual retirement account to help finance the purchase, and you would not be penalized. Withdrawals that are used to pay college tuition or unpaid medical bills are exempt from penalties as well.

Taxes on Distributions

Since taxes have already been paid, Roth account holders do not have to report withdrawals as income. Since traditional accounts are based on pretax funding, those distributions are subject to taxation.

Required Minimum Distributions

The IRS wants to start getting some money eventually, so traditional account holders are forced to take mandatory minimum distributions when they are 72 years old. Roth account holders already paid taxes, so they never have to take money out of their accounts.

No Age Limit for Deposits

Regardless of the type of account that you have, you can continue to contribute into it for an open-ended period of time. Prior to the enactment of the SECURE Act at the end of 2019, traditional account holders had to stop contributing when they reached the mandatory minimum distribution age.

IRA Rules for Beneficiaries

Non-spouse beneficiaries are required to take mandatory distributions annually. The same tax arrangement is the same as it is for the original account holder: Roth beneficiaries receive the payouts tax-free, and traditional beneficiaries have to claim the income.

All money must be cleared out of the account within 10 years of the transfer of ownership. This is a new rule that was installed when the SECURE Act was passed, and it put a damper on a widely utilized estate planning strategy.

Beneficiaries used to stretch out the individual retirement accounts for as long as possible to maximize the tax benefits.

Schedule a Consultation Today!

Our doors are open if you would like to discuss your estate planning goals with a licensed attorney. You can send us a message to request a consultation appointment, and we can be reached by phone at 219-865-2285.

  • Author
  • Recent Posts
Amy Nowaczyk
Amy Nowaczyk
Amy Nowaczyk is a partner at O’Drobinak & Nowaczyk, P.C. Amy’s background in psychology and law have given her a unique perspective on estate planning and elder law issues. Her education and experience have enabled her to identify the needs of her clients in order to create customized estate plans that help her clients avoid probate, control the distribution of their estate, and protect their assets from the high cost of long term nursing care. Clients frequently praise Amy’s ability to make them feel comfortable and at ease while discussing difficult subjects such as their disability and death.
Amy Nowaczyk
Latest posts by Amy Nowaczyk (see all)
  • The Sky Isn’t Falling - February 1, 2022
  • 2022 Medicaid Spousal Allowances Update - January 27, 2022
  • 2022 IRA RMDs Have Been Reduced - January 26, 2022

Other Articles You May Find Useful

intestacy
Estate Planning Survey: Americans Are Woefully Unprepared
estate tax8
Dem Control Could Impact Taxes on Inheritances
IRA inheritance planning
What Are the Rules for Inherited IRAs?
living trust
Are Living Trust Payouts Taxed?
advance directives for health care
Pandemic Illustrates the Importance of Advance Planning
trust 7
When Is a Trust Better Than a Will (Part 2)?

Primary Sidebar

ARE YOU PREPARED FOR THE FUTURE?

There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.

Follow Us

  • Facebook
  • Twitter
  • YouTube
  • Linkedin

Where We Are

O’Drobinak & Nowaczyk, P.C.
1806 Robinhood Boulevard Suite A,
Schererville, IN 46375
Phone: (219) 865-2285
Fax: (219) 865-2362

See Larger MapGet directions

Schererville Office Map

Schererville IN estate planning attorneys

Where we are

Lafayette
123 N. 8th Street Suite 120
Lafayette, IN 47901
Phone: 765-767-5225

See Larger MapGet directions

Lafayette office Map

Schererville IN estate planning attorneys

Footer

  • Speaker Connection
  • Advantages of Working With Our Firm
  • About The American Academy
  • Disclaimer
  • Privacy Policy
  • Sitemap
  • Contact Us

Connect to Us

  • Facebook
  • Twitter
  • YouTube
  • Linkedin
Schererville IN estate planning attorneys O'Drobinak & Nowaczyk footer logo

O’Drobinak & Nowaczyk P.C.
Attorney Advertisement

© 2023 American Academy of Estate Planning Attorneys, Inc.