Remember a while back when I said to quit rushing your parents around? That I’m not in a hurry and they can answer their own questions in their slightly slower way?
That goes doubly when you don’t have a clue what you’re doing with their finances. Now you’ve screwed things up in a major way to “simplify” their life.
I know you wanted to cut down on the number of accounts they have to deal with. And that’s probably a good idea. But you don’t want to close their IRA and withdraw everything in one year. Just to put it in their checking account and reduce their number of accounts by one too many.
Now they’ve got a big tax bill for no good reason at all. You’ve just wasted almost $8000. And because your parents live so inexpensively, that’s almost 1/2 a year of living expenses.
Now they’ve got a big tax bill for no good reason at all. You’ve just wasted almost $8000.
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Tsk, tsk, tsk, kids!
You should have converted their TradIRA into a RothIRA, You should have paid the taxes on that conversion for them (a small expenditure for ALL they have done for you), and in the process saved yourselves Future Taxes on the required TradIRA liqudation @ YOUR substantially higher income tax rates.
sunray a man with smarter adult children, and only Roth IRAs
a man with smarter adult children, and only Roth IRAs
All ROTH may not be the least tax way. Most will require some long term care. At the time long term care becomes a medical deduction distributions from TIRAs can become mostly or completely tax free.
As with all investment decisions, it is based on the individual’s situation.
My mother-in-law had complained about taxes and asked when she could stop paying taxes. My answer was the year after she died. That wasn’t completely true. She developed dementia. The cost of her care far exceeded her income. Income taxes were no longer an issue. It became a spending issue. Before their father died, the kids promised to keep their mother in her home. It was very close to starting a reverse mortgage to cover her expenses.
We have been doing partial annual conversions of pre-tax 401K/IRA contributions to ROTHs. There is no goal to convert all of the balances.
I’d prefer my kid over the financial advisor/tax person making my choices
My dad has the best of both: a kid (me) who makes the choices, and a broker who informs me of the consequences before I pull the trigger. Sometimes I follow the broker’s advice, sometimes not, but I’m never blindsided by surprises after the fact.
Not really sure who is in the “older parents” group but I’d prefer my kid over the financial advisor/tax person making my choices.
Flame away.
Not all kids are financially competent.
My father-in-law repeatedly told all of his kids that they weren’t capable of making financial decisions. Some have now mostly recovered but not all and not completely.
Just before he passed away he made it clear that my husband who is the oldest should take responsibility for his mother’s finances. His other siblings who were local were not capable. The non-local sibling is emotionally unstable. He is one who hasn’t recovered from his father’s conditioning. It was very clear I would be taking over. My father-in-law absolutely wouldn’t talk to me about her finances and over 25 years ago I wasn’t prepared to do so. We made the best decisions were we capable of at the time. None of the decisions were bad. Had we had more information, the decisions could have been better. She had sufficient funds for her lifetime and there was some inheritance. If I knew then what I know now we would have made some different financial decisions for her and us.
No surprises - anecdote after anecdote and it will continue.
The original post reminds me of tax software & some “professionals” where their goal is the biggest refund when that may be a bad choice for the individual involved. Or the deferral of taxes for a later year when that may not be the best choice either.
But I am sure my view is different since I have no parents and so maybe I am the “older” parent.
No surprises - anecdote after anecdote and it will continue.
The original post reminds me of tax software & some “professionals” where their goal is the biggest refund when that may be a bad choice for the individual involved. Or the deferral of taxes for a later year when that may not be the best choice either.
But I am sure my view is different since I have no parents and so maybe I am the “older” parent.
I wish PF blogs/websites required a knowledge test before allowing people to read about whiz bang strategies. I’m seeing a lot of people who have managed to screw up the ‘backdoor’ Roth strategy and are now upset at the tax bill.
The alternative is kids who are not involved at all.
In some cases, that might be an improvement.
Not really sure who is in the “older parents” group but I’d prefer my kid over the financial advisor/tax person making my choices.
Flame away.
No flames here. And I’m not really talking to the elderly parents. I’m talking to their adult children. And it’s basically a warning to not rush through decisions. Rushed decisions are often bad decisions.
It’s also a warning not to overestimate their knowledge or skills. The particular case that triggered my OP was the adult child not knowing what an IRA is or how it works. Now that the mistake has been made, they’ve learned a little about IRA accounts. Unfortunately, the cost of that lesson falls on the parent and not their child.
'd prefer my kid over the financial advisor/tax person making my choices
My dad has the best of both: a kid (me) who makes the choices, and a broker who informs me of the consequences before I pull the trigger. Sometimes I follow the broker’s advice, sometimes not, but I’m never blindsided by surprises after the fact.
This. If you are lucky and have raised intelligent kids, hopefully at least one will have the streetsmarts, financial acumen and ability to handle most estate work. And to know what they don’t know and for what parts to hire a lawyer and/or CPA.