On the other hand, most people do have a beneficiary named for their Roth IRA, and it is usually their spouse.  This is much better than letting it go into your estate.  This way, the IRA is allowed to be commingled with your spouse’s own Roth IRA and the mandatory disbursement rules would be based on the spouses life expectancy. There is much more you can learn at the IRS site concerning disbursements for beneficiaries.

Name your IRA beneficiary now and keep a copy  of the accepted "signed" form in your house with your will or somewhere with all your important papers.  You must be able to prove you have named the beneficiary and in some cases the Roth IRA account managers have lost the form or forgot to transfer it, etc.  Trust me, keep a copy to back this up.

You can also name a secondary beneficiary, so in case the primary has died before you, it would go the them.  The secondary is usually your children, but you must name them.  Actually , depending on how much you have in your Roth IRA , you may wish to apportion some to your children as a co-beneficiary.  This will allow them to extend the tax-free earnings based on their age and life expectancy, and will reduce the total amount in your spouses estate.  This can be very important as you approach a total estate of 2 million dollars.   Everyone can pass 2 million dollars to their heirs , estate tax free, but every dollar over that amount is currently taxed at 45%.  OUCH!

Imagine if you had $2.5 million.  $2 million would not be taxed, but your heirs would lose $225,000 dollars of the other $500,000.  That would not happen if you plan properly.  Take the time to learn this stuff.

Bottom line is the beneficiary form is like a will for your Roth IRA. Be sure you have one.

This web site offers general information for managing personal finances and does not recommend specific financial actions.  For financial advice tailored to your situation, please contact an expert such as a CPA or a personal financial advisor.

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If you retire, what are you going to do?  Why retire if you don’t have anything to do?  It might be that in preparing for your later years, you need to develop a passion for some other things.  Some people already know what they will do.  Say you have always wanted to donate your time at your church or maybe you already have a hobby that you want to put a lot of time into.  That’s great.  You’re ready from that aspect.  If you don’t know, start discovering it now. I just started to learn how to play golf.  At 49, I decided I really wanted to learn, and I am learning. ( Wow, it is so much harder than I thought it would be).

Okay, how much money do you need to retire? I found this quote from over at Thirdage.com, from an article.

“Drew Denning, vice president for the retiree services division at the Principal Financial Group in Des Moines, Iowa, said boomers also need to “make sure your nest egg is at critical mass.”

He noted that studies by the nonprofit Employee Benefit Research Institute in Washington, D.C., and other groups have found that a majority of Americans haven’t saved enough and haven’t tried to estimate retirement expenses.

Denning’s quick formula: Figure that you’ll spend in retirement between 70 percent and 100 percent of what you do before retirement. Subtract your Social Security benefit. Subtract your pension, if you’ve got one. Say the result is that you need an additional $50,000 a year. Multiply that number by 20 to 25, which begins to approximate the number of years you’ll likely live in retirement. In this case, your nest egg needs to be at least $1 million to maintain your lifestyle. “

I can’t really agree with some of that.  It all comes down to your individual circumstances. For example, are you going to still be paying a mortgage? If so, you could refinance it, but maybe you really need to work to pay it off. I don’t think it is reasonable to suggest you will need 100% of what you need will working, but hey, that would be great . Right?

His example expects us to withdraw our nest egg, instead of the “earnings” on our nest egg.  I suppose if you have no family and don’t care about anyone else, that would work.  But a Roth IRA will pay your kids huge and you can leave them a ton of money that way.  If you can, I know you would rather do that.  What Denning doesn’t account for is investing in your “retirement years”.  He is right that you may need 30 years of money in your retirement. But in his example, you would only need about $600,000 invested in good growth stock mutual funds.  That would return you at least 8% , which would be $48,000 per year.  His example has you making zero interest and just spending the principal.  I don’t know how these “experts” make it on that kind of advice.

Read my post on How Much Will I Need to Retire?  It will explain in simple terms how your investments could work.

Social Security benefits.  You can begin collecting Social Security at age 62, but your monthly check will at least 25 percent smaller than it would be if you wait. You can see the impact on your benefits at the Social Security Web site, www.socialsecurity.gov. Search for the “retirement age calculator” and then click on “age 62 benefit” for the calculation.

All this planning will make you so much more comfortable in retirement and will help assure your children don’t have to pay for your retirement.  I’ll be here digging up more relevant information as we go through this planning together.

As with all my financial or tax advice, I am not advising as a professional and I give no professional legal or tax advice. If you need professional advice, please get that from a CPA or attorney.

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