88 year-old mother with IRA

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bartbill
Posts: 44
Joined: Fri Apr 02, 2010 11:52 pm

88 year-old mother with IRA

Post by bartbill » Tue Dec 13, 2016 4:02 pm

Dad died this year. Mother is 88 healthy and living alone on their small acreage - and content to do so for now.

Everything is paid for and she lives on dad's Social Security of about $1400/mo with money left over.

This is the first time I have looked at her finances. My sister lives near her in Tulsa and will manager her living expenses and monitor her well-being. She has not much interest in the financial part. I live in Colorado.

Here is the question: The folks have (had) IRAs with Merrill Lynch. Dads was rolled into hers when he died (triggered the RMD for him). There is only about $65,000 in the total account as follows:

1. Pimco Total Return FD. 30%
2. Loomis Sayles Strategic. 25%
3. Blackrock Global 18%
4. Pimco Real Return. 15%
5. Ivy Asset Strategy. 11%

I have it mind to bail out of this as soon as possible, but then why at this late date. She will pay no taxes even with her RMD if she does nothing. Any acceleration of withdrawls, say spread over two or three years could move her up a tax bracket. But that really wouldn't amount to much.

Maybe I'm mostly sore about the expenses and the Turn-over rate.

What would you do?

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Watty
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Joined: Wed Oct 10, 2007 3:55 pm

Re: 88 year-old mother with IRA

Post by Watty » Tue Dec 13, 2016 4:29 pm

Since she is in good health I would go on and roll out to a lower cost company. 1% a year is still $650 so it is worth the trouble and she may need the money some day.

Once it is at a different company it would be good to do Roth conversions to the top of the 0% tax bracket each year.

The problem is that as she gets older some of the funds could be taxed when the RMD's get larger. With the screwy way that Social Security is taxed the tax could be non-trivial.

Rainmaker41
Posts: 461
Joined: Tue Apr 26, 2016 11:34 am

Re: 88 year-old mother with IRA

Post by Rainmaker41 » Tue Dec 13, 2016 4:33 pm

Expense Ratios range from a low of 0.45% to a high of 1.14%. That's at around $500-ish in fees per year, very roughly.

You could help her roll over the IRA to Vanguard or another reputable firm such as Fidelity or Schwab, and invest in index funds (or a balanced all-in-one fund). Regardless of the planned use for the assets, I see no reason not to do this.

I also see no reason to accelerate the withdrawals and pay more taxes, unless the beneficiary (you?) will be in a higher tax bracket when the IRA becomes an inherited IRA, in which case amounts beyond her RMD each year should be converted to a Roth IRA. Given her 0% tax bracket, Roth conversions to use it up probably make sense.
My username is not about money, but is my old online gaming username. I can't say that I make a great deal of money; I just hate spending it. Married the most loving woman in the world October 2017.

bartbill
Posts: 44
Joined: Fri Apr 02, 2010 11:52 pm

Re: 88 year-old mother with IRA

Post by bartbill » Wed Dec 14, 2016 12:34 pm

Rainmaker.

Thanks much. Like the idea of a rollover.

We have a meeting today with her adviser. I don't have a good handle on MRDs. I assume it was based on life expectancy of about 18 years at age 70. Just checked the RMD charts on the IRS webpage. Seems pretty straight-forward.

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