[Spouse recently passed away. Please help me handle his financial matters]

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Topic Author
Bennie
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[Spouse recently passed away. Please help me handle his financial matters]

Post by Bennie »

[Multiple threads merged into here. Title was "Stimulus check for spouse who recently died" --admin LadyGeek]

Hi everyone,

So gald this forum was recommended to me. I think I need your help and will learn a lot.

My first question is about a stimulus check that just arrived in the mail. It is for my husband - but he died in January.

Where do I return it? Whom can I contact? Does anyone know what I need to do?

Please let me know if you have any idea.

Thanks, Bennie
InMyDreams
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Re: Stimulus check for spouse who recently died

Post by InMyDreams »

Don't know anything about the website, but it says

Can I claim a stimulus check for someone who is deceased?

Yes. For the third stimulus check, people who have died on or after January 1, 2021 are eligible to receive the third stimulus check.


https://www.eitcoutreach.org/blog/what- ... us-checks/

Sorry for your loss.
mbcruiser
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Re: Stimulus check for spouse who recently died

Post by mbcruiser »

Sorry for your loss. It appears that you may be able to retain your Stimulus payment based on IRS guidance (since your spouse passed away after January 1, 2021), and since your payment is based on your 2020 tax filing. See https://www.irs.gov/newsroom/questions- ... rd-payment
Topic Author
Bennie
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Re: Stimulus check for spouse who recently died

Post by Bennie »

Wow - Thank you so much!

And thank you for saying you're sorry - yes, it is hard. We have been together for 29 years and were going to grow old togther.

I hope to get some help on the forum about other things.

It has taken me a while to get started even thinking about finances, but I have to.

Good thing is that I have done our budget, taxes, mortgage, refinance, etc. all these years. He was never interested,

Bad thing is that I know nill about surviving a spouse and we never wanted to talk about it.
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camillus
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Re: Stimulus check for spouse who recently died

Post by camillus »

Bennie wrote: Sat Apr 10, 2021 8:01 pm Wow - Thank you so much!

And thank you for saying you're sorry - yes, it is hard. We have been together for 29 years and were going to grow old togther.

I hope to get some help on the forum about other things.

It has taken me a while to get started even thinking about finances, but I have to.

Good thing is that I have done our budget, taxes, mortgage, refinance, etc. all these years. He was never interested,

Bad thing is that I know nill about surviving a spouse and we never wanted to talk about it.
Many people here would be eager to help you! Please post away with questions you might have!
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Kennedy
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Re: Stimulus check for spouse who recently died

Post by Kennedy »

So sorry, Bernie. Please ask any questions you have as the kind people on this forum will help you. This is honestly a remarkable forum with people with all sorts of life experience who gladly give of their time and expertise.
Topic Author
Bennie
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Spouse died in January: What taxes do I need to be aware of?

Post by Bennie »

[Thread merged into here --admin LadyGeek]

My husband died in January and money is coming to me now from life insurance, his bank accounts, his retirement accounts, and personal posessions. Maybe I forgot something.

We had a simple will, no trust, no children.

We were very very close and he was relatively young - we were going to grow old together after 29 years together already. He was very sick at the end and I was struggling with a career and care giving - now this. I am still a bit off kilter and need to make some decisions about finances now.

Your help would be much appreciated!

As I just posted in another thread:
Good thing is that I have done our budget, taxes, mortgage, refinance, etc. all these years. He was never interested,
Bad thing is that I know nill about surviving a spouse and we never wanted to talk about it.

I have to figure everything out now.

Biggest concern I have at the moment is about taxes. Wondering how much I need to pay next year so I put that aside and don't plan on having that. I heard there is a 4% probate tax - maybe it varies by state or county? - and I am wondering what all is taxed at 4%, if so: bank accounts? Retirement accounts (if you are the beneficiary)? Our home? Cars? (some were in his name only - he was a mechanic and loved cars, we have a number of old clunkers that are not worth much to anyone but us)

I got something from the courthouse in the mail but have not read it yet. Gotta find it, to be honest. I am a bit rattled still.

Thanks for any insights.
Kennedy
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Re: Spouse died in January: What taxes do I need to be aware of?

Post by Kennedy »

It would be helpful if you shared your state of residence. I would think your age would also be pertinent with regard to survivor's benefits.
Topic Author
Bennie
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Re: Spouse died in January: What taxes do I need to be aware of?

Post by Bennie »

VA, 53 - my husband was 63
Zillions
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Re: Spouse died in January: What taxes do I need to be aware of?

Post by Zillions »

Bennie wrote: Sat Apr 10, 2021 8:25 pm My husband died in January and money is coming to me now from life insurance, his bank accounts, his retirement accounts, and personal posessions. Maybe I forgot something.

We had a simple will, no trust, no children.

We were very very close and he was relatively young - we were going to grow old together after 29 years together already. He was very sick at the end and I was struggling with a career and care giving - now this. I am still a bit off kilter and need to make some decisions about finances now.

Your help would be much appreciated!

As I just posted in another thread:
Good thing is that I have done our budget, taxes, mortgage, refinance, etc. all these years. He was never interested,
Bad thing is that I know nill about surviving a spouse and we never wanted to talk about it.

I have to figure everything out now.

Biggest concern I have at the moment is about taxes. Wondering how much I need to pay next year so I put that aside and don't plan on having that. I heard there is a 4% probate tax - maybe it varies by state or county? - and I am wondering what all is taxed at 4%, if so: bank accounts? Retirement accounts (if you are the beneficiary)? Our home? Cars? (some were in his name only - he was a mechanic and loved cars, we have a number of old clunkers that are not worth much to anyone but us)

I got something from the courthouse in the mail but have not read it yet. Gotta find it, to be honest. I am a bit rattled still.

Thanks for any insights.
My deepest condolences on your loss. I can't imagine how overwhelming and raw this still must be for you.

I am not a lawyer but I live in CA and what I know from my friends' experience is that there is no probate etc if you owned a home jointly and he passed. There is probate if there was no living revocable trust, and only a will, when the surviving spouse passes. However, this may not be the case for you, in the state that you live in.

So, I would suggest an attorney to help you navigate this difficult time, just to be sure. This will give you the breathing space and time off to grieve and let your emotions out. You probably do not need the stress of taking any financial decisions when you're still getting over this loss and engaging a lawyer's help to navigate any financial issues might be the best decision at this point.
bsteiner
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Re: Spouse died in January: What taxes do I need to be aware of?

Post by bsteiner »

The Virginia probate tax is 0.1% plus up to 1/3 of 0.1% local tax.
Topic Author
Bennie
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Inherited IRA or IRA rollover?

Post by Bennie »

[Thread merged into here --admin LadyGeek]

Background: my husband died in Januray and left me his retirement accounts. I am working but need to replace his income from this money now.

I heard that you can tranfer the monies into an inherited IRA and withdraw immediately without penalty (the money is income before taxes, of course). In fact, according to a change in laws in 2019, apparently the monies have to be withdrawn over a 10-year period.

He was 63 and I am 53.

I would like to try to stretch the monies for 14 years, until I am ready to retire at 67. I have my own retirement accounts with my company after that, I hope.

A financial advisor from a large institution told me, as I understood it, to roll over only what I need in the next 6 and 1/2 years to an inherited IRA and roll the rest to an IRA because after 59 and 1/2 I can withdraw from that without penalty.

It seems that I can also roll monies from an inherited IRA to an IRA, but I am not sure about that. Do you know?

I asked the advisor why I should not roll everything to an iherited IRA, just in case I need it sooner than 6 and 1/2 years from now, and then I could roll the rest (after 10 years) into an IRA, if I have anything left, so it is all out of the inherited IRA in 10 years' time. He said that people may forget, be in a coma, etc. and then there would be a big loss to that person. Hm. I do not tend to forget things like this and I could make arrangements in case I am incapacitated. I would rather have access to the entire amount.

What do you think?
PoppyA
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Re: Spouse died in January: What taxes do I need to be aware of?

Post by PoppyA »

Federally you can’t still file 2021 taxes as married. After that it will be single or head of household.
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Re: Spouse died in January: What taxes do I need to be aware of?

Post by Dottie57 »

PoppyA wrote: Sat Apr 10, 2021 8:51 pm Federally you can’t still file 2021 taxes as married. After that it will be single or head of household.
I thought OP could still file 2021 taxes (next year filing) as married.
Topic Author
Bennie
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So what is wrong with not investing?

Post by Bennie »

[Thread merged into here --admin LadyGeek]

I have a large sum of money to manage now so I don't get in trouble in the next 14 years: my husband left me his retirement accounts and I need to replace his income with those monies until I retire, at least. I have my own career and retirement account that, I hope, will be enough for me when I am 67 and on. I am 53 now and he was 63.

The market has been good to us over the last 20 years and I am very grateful. My retirement accounts have always been in a more aggressive investment mix and have recently been shifted to a Fidelity 2030 Freedom Fund. That is fine with me.

My husband's life savings, however, are something I woud like to protect, and I have zero tolerance for loss there- so I was thinking about taking it all out and putting it into an inherited IRA, into a Money Market (with 0 interest). Fidelity said, as I understood it, that they are FDIC insured up to 1.25 million dollars, which is much more than he left me, and so I am thinking the money would be safe there.

At this point, I really don't want to grow it, I just want to keep it and have it be there for me when/as I need it.

Is that the wrong idea? How do you estimate and calculate inflation and the future worth of money after inflation for 14 years out?
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celia
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Re: Spouse died in January: What taxes do I need to be aware of?

Post by celia »

Bennie wrote: Sat Apr 10, 2021 8:25 pm As I just posted in another thread:
Good thing is that I have done our budget, taxes, mortgage, refinance, etc. all these years.
You definitely have an advantage over other women in a similar situation. Your experience and familiarity with terminolgy will help you here.
Biggest concern I have at the moment is about taxes. Wondering how much I need to pay next year so I put that aside and don't plan on having that.
Fortunately, we are now in the tax season for calculating 2020 income taxes. Since DH was alive for the whole year, 2020 should be close to 2019 for you, except if itemizing medical expenses benefits you. If you feel too distracted to tackle the taxes, just drop off the 2020 tax statements and a copy of your 2019 return at a tax prep company and let them pull your return together.

Since he was alive for part of 2021, you will be able to file MFJ for this year too. So after this settles down, do an estimated tax return for this year to get an idea of how much past numbers will now change. Also consider if you should do Roth conversions this year to take advantage of your final MFJ tax brackets. (The space in each tax bracket for Singles is half as much as for MFJ.)

Don’t forget as you notify each financial institution of your husband’s death, that there should be some updating of cost basis for each asset owned.

If you have specific questions, ask them here. We will help the best we can.
Last edited by celia on Sat Apr 10, 2021 9:31 pm, edited 1 time in total.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
JoinToday
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Re: Spouse died in January: What taxes do I need to be aware of?

Post by JoinToday »

This is the last year you can do a Roth conversion as married. Depending on your IRA / 401k amount and expected RMDs, you may want to consider larger Roth conversion this year.
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Globalviewer58
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Re: Spouse died in January: What taxes do I need to be aware of?

Post by Globalviewer58 »

Bennie

Sorry for your loss.

You may find the Boglehead Wiki helpful. I see this is your first post. In the top section of the home page is a Wiki tab. Once you are on the Wiki page you can search for topics such as Probate, Inherited IRA, Roth conversion, etc. For example, the Probate page contains general information on the process and a link to specific details for your state.

You may be aware that the deadline for filing 2020 Federal tax returns is extended to May 17, 2021. You may file an extension for 2020 and pay what you believe is owed by May 17 to avoid interest and penalties.

Tax year 2021 return may be filed as MFJ.

Good luck!
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bengal22
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Re: Stimulus check for spouse who recently died

Post by bengal22 »

You definitely get to keep stimulus check for your husband. My mom died in January and I received her check in the mail. It had her name and deceased and had my name %.. So they updated her info based on thev2020 return that I filed in March.
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Silk McCue
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Re: So what is wrong with not investing?

Post by Silk McCue »

So very sorry for your loss. Please hold off on opening more new posts for the moment. In order for folks to help you with this the information and questions need to be kept together so that a complete picture can be addressed. An administrator will come along to help.

Cheers
NYC_Guy
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Re: So what is wrong with not investing?

Post by NYC_Guy »

You should consider a staggered ladder of US government securities that matches your time horizon.
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Bennie
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Re: Spouse died in January: What taxes do I need to be aware of?

Post by Bennie »

Oops - ok, I may have done the finances but maybe not very well? :D I am not sure what a Roth IRA is - we just had company jobs and paid into the plans we were offered and took the rest home to spend.

I think I know you can take money out of a Roth IRA without paying taxes, but don't you pay taxes before you put the money in, so what is the advantage? I always thought if you have 10.- and you would pay 3.- in taxes, let's say, it would be good to put the 10.- away before taxes and earn interest on the IRAs money for a few decades before ultimately paying them the 3.- in tax plus the tax on the interest you earned (but you get to keep most of that).

I have not itemized in years but always taken the standard deductions.

So the 0.1% is a tax on the retirement and savings accounts, too,and our home?
000
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Re: So what is wrong with not investing?

Post by 000 »

My condolences. Being emotionally attached to the specific dollar amount is understandable because it came from your late husband, but in my opinion the best way to honor his life savings would be to use them as he intended, which would mean to invest them in a suitable fashion for you (and/or others for whom they were intended, if applicable). As such, I think very few experts in the area would consider 100% cash a suitable allocation for a 53 year old.
Bennie wrote: Sat Apr 10, 2021 8:57 pm have zero tolerance for loss there
How do you estimate and calculate inflation and the future worth of money after inflation for 14 years out?
Future inflation is unknown. Even a 100% cash allocation has risk of loss: the loss of purchasing power.
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Bennie
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Re: Spouse died in January: What taxes do I need to be aware of?

Post by Bennie »

Fortunately, we are now in the tax season for calculating 2020 taxes. Since DH was alive for the whole year, 2020 should be close to 2019 for you, except if itemizing medical expenses benefits you. If you feel too distracted to tackle the taxes, just drop off the tax statements at a tax prep company and let them pull your return together.
Thank you so much, Celia! I think I got the 2020 taxes under control - like you said - it is like last year - I just need to read up some more on deceased status of tax payer - I think I can sign for my husband from what I read and I have all the documents I need together.

My question was more about what taxes I may need to pay on inherited monies, because I have never dealt with that.

Since he was alive for part of 2021, you will be able to file MFJ for this year too. So after this settled down, do an estimated tax return for this year to get an idea of how much past numbers will now change. Also consider if you should do Roth conversions this year to take advantage of your final MFJ tax brackets. (The space in each tax bracket for Singles is half as much as for MFJ.)

Don’t forget as you notify each financial institution of your husband’s death, that there should be some updating of cost basis for each asset owned.

If you have specific questions, ask them here. We will help the best we can.
What is a Roth conversion? Also, what does "updating of cost basis for each asset" mean? please..
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Bennie
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Re: Spouse died in January: What taxes do I need to be aware of?

Post by Bennie »

Globalviewer58 wrote: Sat Apr 10, 2021 9:08 pm Bennie

Sorry for your loss.

You may find the Boglehead Wiki helpful. I see this is your first post. In the top section of the home page is a Wiki tab. Once you are on the Wiki page you can search for topics such as Probate, Inherited IRA, Roth conversion, etc. For example, the Probate page contains general information on the process and a link to specific details for your state.

You may be aware that the deadline for filing 2020 Federal tax returns is extended to May 17, 2021. You may file an extension for 2020 and pay what you believe is owed by May 17 to avoid interest and penalties.

Tax year 2021 return may be filed as MFJ.

Good luck!
Thank you! Yes! Very helpful!!
Globalviewer58
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Re: Spouse died in January: What taxes do I need to be aware of?

Post by Globalviewer58 »

Bonnie

You should read the Wiki page on probate to learn which items are to be included in the probate calculation. One example to look for is the deed on your home. If the home is deeded Joint Trust with Right of Survivor then the home is not included in probate. There are other deed types with the same result. The same type of detail on life insurance benefits, investment accounts, bank accounts, etc. are identified on the Probate page for Virginia through the link on the Wiki.
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Sandtrap
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Re: So what is wrong with not investing?

Post by Sandtrap »

Condolences 🙏🙏

For now, choose accounts and or funds that have

Security of Principle (includes CD's, Treasuries, Money Market, etc)
Liquidity
Accessibility

Read the forum wiki on “Windfalls”
Don’t do anything until you read it.

Avoid friendly helpful;
Financial advisors
Wealth managers
Bank advisors
Helpful uncle Joe who knows about money and investing
Etc.

j🌺
Last edited by Sandtrap on Sun Apr 11, 2021 8:06 am, edited 1 time in total.
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JonnyDVM
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Re: So what is wrong with not investing?

Post by JonnyDVM »

Sorry for your loss. There is nothing wrong with having enough and not wanting to lose it. Your enemy is inflation. Consider bonds or CDs. You could also do a very conservative 20:80 portfolio. Remember, you need to keep pace with inflation. 0% isn’t going to cut it. Inflation averages about 2.5% per year last I looked.
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Bama12
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Re: So what is wrong with not investing?

Post by Bama12 »

Nothing is wrong with not investing. People didn't invest for years but they lived a much simpler life.
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Re: Inherited IRA or IRA rollover?

Post by Alan S. »

Bennie wrote: Sat Apr 10, 2021 8:46 pm Background: my husband died in Januray and left me his retirement accounts. I am working but need to replace his income from this money now.

I heard that you can tranfer the monies into an inherited IRA and withdraw immediately without penalty (the money is income before taxes, of course). In fact, according to a change in laws in 2019, apparently the monies have to be withdrawn over a 10-year period.

He was 63 and I am 53.

I would like to try to stretch the monies for 14 years, until I am ready to retire at 67. I have my own retirement accounts with my company after that, I hope.

A financial advisor from a large institution told me, as I understood it, to roll over only what I need in the next 6 and 1/2 years to an inherited IRA and roll the rest to an IRA because after 59 and 1/2 I can withdraw from that without penalty.

It seems that I can also roll monies from an inherited IRA to an IRA, but I am not sure about that. Do you know?

I asked the advisor why I should not roll everything to an iherited IRA, just in case I need it sooner than 6 and 1/2 years from now, and then I could roll the rest (after 10 years) into an IRA, if I have anything left, so it is all out of the inherited IRA in 10 years' time. He said that people may forget, be in a coma, etc. and then there would be a big loss to that person. Hm. I do not tend to forget things like this and I could make arrangements in case I am incapacitated. I would rather have access to the entire amount.

What do you think?
Sorry to hear of your loss.
And I agree with your thinking.
You should have the inherited IRA retitled with you as beneficiary, at which point the custodian will probably transfer the funds to a new inherited IRA account. You can take distributions without penalty before 59.5 because they will be coded as distributions due to death (Code 4) on Form 1099R. Meanwhile you will have no inherited IRA RMDs to take until your husband would have reached 72. You will reach 59.5 before that, and at that time you should elect to assume ownership of the inherited IRA. Since you will be 59.5 then you can continue to take distributions without penalty and your own RMDs will begin when you reach 72. The difference from what the advisor said is that there is no reason to elect ownership of any portion before 59.5 since you never know how much you may need from the inherited IRA, so why roll some to your own IRA that you can only tap with a penalty before 59.5. Keep it all as inherited until 59.5, then elect ownership of the entire account then.

It may still be interesting to explore the scenario the advisor offered should you forget to elect ownership at 59.5. The IRA would continue and you would have full penalty free access. In 9 years when husband would have reached 72 if you then forget to take the beneficiary RMD that starts then, you default to ownership status automatically, erasing any beneficiary RMD. As the owner even though the IRA has not been retitled, your ownership RMDs would start when you reach 72. So you really have 13 years before you have any financial consequence of forgetting to elect ownership at 59.5.

Finally, if you have your own IRA now, you can eventually combine the two once you no longer need the inherited IRA titling. Remember that there is a one 60 day rollover limit over a 12 month period, and the inherited IRA counts with your own IRAs if you have one. Election of ownership is not a reported distribution at that time and will not count as a rollover.
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arcticpineapplecorp.
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Re: So what is wrong with not investing?

Post by arcticpineapplecorp. »

Sorry for your loss. There's nothing wrong with not investing but if you have zero tolerance for loss you should realize that a money market account will guarantee a loss ...of purchasing power as the interest earned will be less than inflation. It won't seem like a loss the same as volatility of investments but it's a loss just the same.

I'm also curious about the $1.25 million fdic because I see 4250k for IRA:
https://www.fdic.gov/resources/deposit- ... -a-glance/

maybe they're going to use CDARS?
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
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celia
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Re: Inherited IRA or IRA rollover?

Post by celia »

A 401K, as you know, is money you (and your employer) contribute to a retirement account. Your contributions are ususally made pre-tax and you will pay the taxes on it as the money is withdrawn in retirement.

An IRA is a retirement account that you contribute to on your own (outside of work). Basically, there are two kinds. The Traditional IRA has it’s contributions deducted from your income but you pay the taxes when the money is withdrawn (just like the 401K). [This is why the accounts are considered ‘tax-deferred’—the Tax will be paid later.]

The other kind of IRA is a Roth IRA. You make contributions that are NOT deducted from your taxes (ie, the contributions are taxed). But when you withdraw, there are no taxes owed (as long as you are over 59.5 and you have had money in a Roth for 5 years) <—-if not true, there will be an early withdrawal penalty.

The general rule of which IRA to use depends on your current tax bracket. If you think your current tax bracket is less than what it will be in retirement, you should pay the taxes now and put the money in Roth. If you think your retirement tax bracket will be lower in retirement than now, you should put your contributions in Traditional IRA instead. If you think your retirement tax bracket will be the same as now, it doesn’t matter which you choose. (We have LOTS of threads here discussing this and what makes our tax brackets change— from a change in our income to a change in tax laws.)


The next thing to know is the Roth Conversion, which is transferring money from a tax-deferred account to a Roth. You pay taxes on the withdrawal (on your income taxes for the year), but once it’s in a Roth, all future growth is tax-free. It is best to convert the asset that is
expected to grow the fastest (ie, a stock fund) to maximize future tax-free growth.

Bennie wrote: Sat Apr 10, 2021 8:46 pm I would like to try to stretch the monies for 14 years, until I am ready to retire at 67. I have my own retirement accounts with my company after that, I hope.

A financial advisor from a large institution told me, as I understood it, to roll over only what I need in the next 6 and 1/2 years to an inherited IRA and roll the rest to an IRA because after 59 and 1/2 I can withdraw from that without penalty.
Inherited IRAs are just like your own, except that you can’t contribute to them and the withdrawal rules are different. In most cases, you can’t stretch out the withdrawals more than 10 years, unless you are a spouse of the deceased, a minor child, or disabled. The beneficiary does not have to wait until age 59.5. (That is why the advisor suggested leaving 6.5 years of needed money in an Inherited IRA. The rest was recommended to remain in a regular IRA so withdrawals wouldn’t be required until 72, but could still be taken, if desired, after 59.5. Money in a regular IRA can also be converted to Roth, but not if it is in an Inherited IRA.). But some of these rules are relaxed if the beneficiary is the spouse of the deceased, as Alan S. described.


After your 2020 taxes are done, I think you should find out your Marginal Tax Rate (how much the next dollar of income would be taxed) and at least convert to the top of that tax bracket this year.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
Carl53
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Re: Spouse died in January: What taxes do I need to be aware of?

Post by Carl53 »

A link to the wiki page to look up general topics and financial terms is at the top of the bogleheads webpage, just below the title block.

https://www.bogleheads.org/wiki/Main_Page

Example for Roth Conversion

https://www.bogleheads.org/wiki/Roth_IRA_conversion
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Re: Stimulus check for spouse who recently died

Post by LadyGeek »

Welcome! I am very sorry for your loss. I became a widow last year and have deposited checks made out to a deceased husband. The key point is that you need to have a joint checking account that's still open. If so, you can deposit the check in that account.

Please see my thread here: Depositing a deceased spouse's check into a joint bank account

Also, see the wiki: Estate planning and especially the referenced forum thread Process for surviving spouse.

Don't worry, we'll get you through this. Take your time. If you have any questions, just ask.
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BlueOrange10
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Re: So what is wrong with not investing?

Post by BlueOrange10 »

JonnyDVM wrote: Sat Apr 10, 2021 9:46 pm Sorry for your loss. There is nothing wrong with having enough and not wanting to lose it. Your enemy is inflation. Consider bonds or CDs. You could also do a very conservative 20:80 portfolio. Remember, you need to keep pace with inflation. 0% isn’t going to cut it. Inflation averages about 2.5% per year last I looked.
If your enemy is inflation, why are you suggesting she buys bonds? She will lose money :oops:
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climber2020
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Re: So what is wrong with not investing?

Post by climber2020 »

Bennie wrote: Sat Apr 10, 2021 8:57 pm At this point, I really don't want to grow it, I just want to keep it and have it be there for me when/as I need it.
One possibility is a conservative 30/70 portfolio consisting of 30% in a total stock fund and 70% in either a total bond fund or short/intermediate treasury fund.

In the past, such a portfolio has done well to keep up with and exceed inflation while minimizing losses during the occasional stock market crash.

If you leave it all in cash, it is guaranteed to decline in value over time due to inflation.

With the above 30/70 portfolio, there may be times where the value drops some, but as long as you hold through those periods and don’t panic, it will never go to zero.
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Re: So what is wrong with not investing?

Post by Paradise »

Without knowing more information, people consider cash safe and can’t decrease but it’s actually a guaranteed loss due to inflation. That’s one reason why you should invest even if it’s conservatively.

I also believe in “quitting when you’ve won,” though. If the savings is enough, I don’t blame you for going conservative. I think all cash is inefficient though when there are reasonably low risk investments that will at least help a bit with the inflation.
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JonnyDVM
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Re: So what is wrong with not investing?

Post by JonnyDVM »

BlueOrange10 wrote: Sun Apr 11, 2021 7:20 am
JonnyDVM wrote: Sat Apr 10, 2021 9:46 pm Sorry for your loss. There is nothing wrong with having enough and not wanting to lose it. Your enemy is inflation. Consider bonds or CDs. You could also do a very conservative 20:80 portfolio. Remember, you need to keep pace with inflation. 0% isn’t going to cut it. Inflation averages about 2.5% per year last I looked.
If your enemy is inflation, why are you suggesting she buys bonds? She will lose money :oops:
That’s a bold statement. By your logic no one should buy bonds at all? In one sense, I agree with you in that I’m reflexively avoiding bonds myself these days, on the other hand, if someone is talking about 0% interest vs what bonds are yielding, I’ll recommend the bonds.
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Re: Spouse died in January: What taxes do I need to be aware of?

Post by fourwheelcycle »

Bennie, I am very sorry for your husband's early death. I am happy to see that Celia, Globalviewer58, and others have offered helpful advice.

Has anyone answered your question about re-setting (stepping up) the basis (original purchase cost) of your husband's share of your assets to their current market value? This is true, and a great benefit. The recorded basis for 50% of any assets owned in a joint account with your husband should be re-set as if those assets were purchased on the day your husband died (current market value). As someone else suggested, I don't think any assets owned in a joint account, or your house and cars, if titled jointly, will be subject to probate or probate tax. Unless you happen to have a local county clerk who will walk you through VA's probate process you should definitely contact a qualified attorney to advise you. I'm sure someone will post and say go to a lawyer in any event, but you could start with a county clerk and see how helpful they are.

Any assets your husband owned in his name only will be inherited by you and subject to probate and probate tax. However, 100% of the value of those assets will be stepped-up to their current market value. The step-up in basis means if you ever sell the assets you will only owe capital gains taxes on their increase in value from the date of your husband's death. Another plus is that the long term capital gains tax rate will apply to all of the stepped-up assets, even if they were originally purchased during the past year and might otherwise be taxed at the higher short-tern capital gains rate. You will need to call each broker, Vanguard or wherever you and your husband had taxable investment accounts, and ask them to re-set (step-up) the basis for 50% of each jointly owned asset and 100% of each asset owned in your husband's name and inherited by you. This also applies to half of your house value if it was owned jointly and 100% of its value if it was titled only to your husband.

I am not a tax or probate expert - if I have made mistakes above someone will post to correct me!

On this forum we often get posts from spouses who wonder, and worry, how their surviving spouse will manage their finances if they die first. We all know our souses may have difficulty, but we may not appreciate how the loss of their spouse may create a cloud of loss, and a fear of missing important things to do, that will make it even harder for our surviving spouses to accomplish necessary tasks during the first year, or more, after our deaths. This happened to a close friend of ours. We spent part our vacation every year with her and her husband, then one day he died suddenly. She has continued her life, with support from a local doctor friend and a local accountant friend, but it has been difficult - and very difficult for the first year.

One final note on Roths. You have not posted the level of your savings or the portion that may be in your and your husband's employer-based accounts - like 401k or 403b accounts. Like you, I also just thought the best thing to do is to put as much as allowable in those tax-deferred accounts and then pay taxes on the money when you take it out during retirement. It was not until I retired and learned about Roths that I even thought about Roth conversions. Here's the deal - if you have $100K in a tax-deferred retirement account you can take the money out month by month, or whatever, and pay your 2022 and later year single person income tax rate on the money. OR, with the help of an accountant or a good account representative at Vanguard, etc., you can withdraw all or part of that $100K now and next year, at your lower married filing jointly tax rate for 2020 and 2021, and roll the money over into an after-tax Roth IRA account. The money will continue to grow whether it sits in a tax-differed account or in an after-tax Roth IRA, but having paid the taxes on the principal now, there will be no taxes on the growth amount in the Roth, and 100% of the Roth money will be free of taxes when you finally withdraw it in the future. You may or may not want to do this, you have to look at the tax cost each way and decide what you want to do. Again, an accountant can help you with this.
BlueOrange10
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Re: So what is wrong with not investing?

Post by BlueOrange10 »

JonnyDVM wrote: Sun Apr 11, 2021 7:53 am That’s a bold statement. By your logic no one should buy bonds at all? In one sense, I agree with you in that I’m reflexively avoiding bonds myself these days, on the other hand, if someone is talking about 0% interest vs what bonds are yielding, I’ll recommend the bonds.
I consider cash as insurance against all asset classes going down at the same time, which is certainly possible with deleveraging. Money markets and ultrashort term bonds are yielding like 0.1% right now. I don't lose sleep over holding too much cash with yields that low.
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Re: Spouse died in January: What taxes do I need to be aware of?

Post by PoppyA »

My apologies for fat fingering this. You CAN file 2021 federal as married.

Also, I am so sorry for you loss. I wish you peace & understanding.
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JonnyDVM
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Re: So what is wrong with not investing?

Post by JonnyDVM »

BlueOrange10 wrote: Sun Apr 11, 2021 7:59 am
JonnyDVM wrote: Sun Apr 11, 2021 7:53 am That’s a bold statement. By your logic no one should buy bonds at all? In one sense, I agree with you in that I’m reflexively avoiding bonds myself these days, on the other hand, if someone is talking about 0% interest vs what bonds are yielding, I’ll recommend the bonds.
I consider cash as insurance against all asset classes going down at the same time, which is certainly possible with deleveraging. Money markets and ultrashort term bonds are yielding like 0.1% right now. I don't lose sleep over holding too much cash with yields that low.
Careful or I’ll sic the predicting the future police on you :D

Anyway, I maintain based on OPs post total bond or a 20:80 portfolio is what I would recommend. Or even *whisper* a good financial advisor.
I’d trade it all for a little more | -C Montgomery Burns
BlueOrange10
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Re: So what is wrong with not investing?

Post by BlueOrange10 »

JonnyDVM wrote: Sun Apr 11, 2021 8:10 am Anyway, I maintain based on OPs post total bond or a 20:80 portfolio is what I would recommend. Or even *whisper* a good financial advisor.
Deleveraging is just as scary as inflation. Cash is king.
Dave55
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Re: So what is wrong with not investing?

Post by Dave55 »

Sorry for your loss.
I agree with the 20% stocks 80% bonds portfolio. Historically 7.1% return. Worst year -10.1%.
More details are here:
https://investor.vanguard.com/investing ... allocation

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7eight9
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Re: So what is wrong with not investing?

Post by 7eight9 »

As a conservative investor you might want to consider fixed annuities. They are currently offering much better rates than a money market fund.

A fixed annuity is an insurance contract that pays a fixed rate of interest for a "set term", usually ranging from one to ten years. After the set term, a new fixed rate is offered for the next term. One popular form of a fixed annuity is a "multi-year guaranteed annuity", or "MYGA", also referred to as a "CD annuity".
Learn more about fixed annuities --- https://www.bogleheads.org/wiki/Fixed_annuity

There was a good thread recently titled Purchasing MYGAs - Blueprint Income vs. Gainbridge vs. Canvas that might be worth a look.
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JoeRetire
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Re: So what is wrong with not investing?

Post by JoeRetire »

Bennie wrote: Sat Apr 10, 2021 8:57 pm I have a large sum of money to manage now so I don't get in trouble in the next 14 years

I am 53

My husband's life savings, however, are something I woud like to protect, and I have zero tolerance for loss there

At this point, I really don't want to grow it, I just want to keep it and have it be there for me when/as I need it.

Is that the wrong idea?
It's not wrong.

But remember, you still have 40-50 years or so to live. Over that period of time, inflation can significantly reduce the purchasing power of your husband's life savings, if saved at 0% interest. Something will be there when/as you need it. But that something may buy less than you would imagine.

Money is fungible. Both your retirement savings and your husband's life savings are money. I would suggest you invest them in the same manner. If the Fidelity 2030 Freedom Fund is good for one pile of your money, why wouldn't it be good for the other pile?
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JonnyDVM
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Re: So what is wrong with not investing?

Post by JonnyDVM »

BlueOrange10 wrote: Sun Apr 11, 2021 8:19 am
JonnyDVM wrote: Sun Apr 11, 2021 8:10 am Anyway, I maintain based on OPs post total bond or a 20:80 portfolio is what I would recommend. Or even *whisper* a good financial advisor.
Deleveraging is just as scary as inflation. Cash is king.
Keeping an enormous sum in cash is the opposite of what I would suggest and I think most on this forum would agree. You might as well tell OP to load up on crypto.
I’d trade it all for a little more | -C Montgomery Burns
BlueOrange10
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Re: So what is wrong with not investing?

Post by BlueOrange10 »

JonnyDVM wrote: Sun Apr 11, 2021 8:35 am Keeping an enormous sum in cash is the opposite of what I would suggest and I think most on this forum would agree. You might as well tell OP to load up on crypto.
I think you need an economist as your advisor, not a financial advisor. Any economist will tell you about how emerging markets are about to get crushed with higher US yields due to their debt denominated in US dollars, potentially causing a deleveraging crisis and a mad scramble for US dollars. Cash is king.
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Re: Spouse died in January: What taxes do I need to be aware of?

Post by SuzBanyan »

Bennie wrote: Sat Apr 10, 2021 9:14 pm Oops - ok, I may have done the finances but maybe not very well? :D I am not sure what a Roth IRA is - we just had company jobs and paid into the plans we were offered and took the rest home to spend.

I think I know you can take money out of a Roth IRA without paying taxes, but don't you pay taxes before you put the money in, so what is the advantage? I always thought if you have 10.- and you would pay 3.- in taxes, let's say, it would be good to put the 10.- away before taxes and earn interest on the IRAs money for a few decades before ultimately paying them the 3.- in tax plus the tax on the interest you earned (but you get to keep most of that).

I have not itemized in years but always taken the standard deductions.

So the 0.1% is a tax on the retirement and savings accounts, too,and our home?
So sorry for your loss.

Fourwheelcycle did a good job explaining most of the issues.

Your understanding of deductible v. Roth contributions during your earning years is correct. Roth conversions make sense when you got a 30% tax deduction when you put the money into your traditional 401k but can take the money out at a lower tax level, say 20%. So whether a Roth conversion makes sense ow or at anytime depends on your specific circumstances. Posters bring it up now because you can file MFJ for 2021 and will file as a Single in 2022. MFJ has generally lower tax rates on the same amount of earnings. But you have until the end of this 2021 to decide if it makes sense for you.

Finally, think of the probate cost of 0.1% as a fee for the State//County moving assets held under your husband’s name to you under your will. If the asset moves in another way, such as you were named as a beneficiary on his 401k, or you owned your house as joint tenants with right of survivorship, then that asset would not be subject to probate and the fee would not be applicable.
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JonnyDVM
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Re: So what is wrong with not investing?

Post by JonnyDVM »

BlueOrange10 wrote: Sun Apr 11, 2021 8:40 am
JonnyDVM wrote: Sun Apr 11, 2021 8:35 am Keeping an enormous sum in cash is the opposite of what I would suggest and I think most on this forum would agree. You might as well tell OP to load up on crypto.
I think you need an economist as your advisor, not a financial advisor. Any economist will tell you about how emerging markets are about to get crushed with higher US yields due to their debt denominated in US dollars, potentially causing a deleveraging crisis and a mad scramble for US dollars. Cash is king.
Ok. Well that’s just false. I don’t think I can engage on this debate anymore. Strait cash has always been the way to go except for every previous period in all of US history.
I’d trade it all for a little more | -C Montgomery Burns
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