The Stretch IRA Is Dead

When the avg person (that has little financial education) gets the option to receive the lump sum of $100k or stretch it for $5k/yr, imo they won't stretch. With the big check they can pay off debt, get a new car, etc... They don't care if they have to pay a little extra tax. And maybe for some it does make sense to take the lump sum given their situation, however its also likely that many don't even know they could stretch it.
Paying off debt vs buying a new car are two different conversations but we all know that people love to "treat" themselves with "found" money.

Of course, with a little guidance, they could pay off the credit cards, take that bucket list trip, account for the additional taxes, AND still stretch the balance.

Rather, they used to be able to.
 
They don't care if they have to pay a little extra tax

agree & from what they have seen on the media, they are told high income earners have loopholes & pay low taxes. Then, 3-14 months later when they see their tax person, they flip out & cant fathom that the $10k they had withheld wasn't enough & now owe another 15-25k in taxes. But have already spent the 100k paying off debt that possibly was only costing 4-6% & a nice vacation/boat/etc. I have seen this happen dozens of times when people take money from qualified plans or inherit qualified money or NQ annuity with gains.

they find out quickly the higher income pay way higher tax rates & many times lose some deductions that phase out as income goes up, even if the income was merely a 1 year spike due to a lump sum received. they then say " I wish there was a way to have not paid so much tax"-----uh, yeah. there was. take the money systematically over time & stay in same tax brackets. People should be speaking to their tax person before hand, but many dont
 

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