Donor-Advised Funds, Tax Planning in Retirement, and Roth IRA’s Ep #98

On this week’s episode of Retirement Starts Today we’ll discuss whether donor-advised funds are a good fit, tax planning in retirement, and answer a listener question about Roth IRA’s. Have you taken our listener survey? If you are signed up for the Every Day is Saturday email list then you’ve probably seen the listener survey. But if you haven’t had the opportunity please take the time to fill it out so that we can produce the best podcast we can to fill your needs. After you’ve taken the survey listen in to this episode to help prepare you for your best retirement.

Outline of This Episode

[1:12] Have you taken our listener survey?
[2:40] When a donor-advised fund is not a good fit
[6:12] How do I withhold taxes and how much in retirement?
[10:18] What do I do if I want a Roth IRA but I make too much money?

What are donor-advised funds?

We’ve all been touting the benefits of donor-advised funds lately. And just a couple of episodes ago we had John Madison on to explain the benefits of these charitable funds. In case you missed it, a donor-advised fund is a charitable fund that we can use to make your charitable contributions tax-deductible that might not otherwise be deductible. The donor-advised fund is like having a middle man that can clump several years of donations together to reap the biggest tax benefits.

Do you know whether a donor-advised fund is right for you? Listen to this episode of #RetirementStartsToday to find out. Click To Tweet

When donor-advised funds are not a good fit

However, a donor-advised fund isn’t for everyone. If you don’t have liquid after-tax cash outside of your IRA then a donor-advised fund isn’t for you. Also, if you have a lifetime pension that covers all your monthly needs and don’t have much savings beyond that then regular monthly gifting is likely your best option rather than opening a donor-advised fund. It’s still important to support your favorite charities even if it’s not as beneficial at tax time.

Tax planning in retirement

One question that many new retirees have is: how do I withhold taxes and how much in retirement? After living a life of having a steady paycheck come each month you now have to turn your accumulated savings into monthly income. But, what do you do about taxes? The first step is to figure out how much you need to withhold. You can do this by asking your CPA or using Turbo Tax’s tax tool. Then have your advisor or custodian withhold your yearly taxes divided by 12 every month. You’ll need to remember to withhold even more to cover your withholding. Listen in to learn how to do the math so that you don’t fall short.

Listen to this episode of #RetirementStartsToday to learn how much to withhold from your #retirement withdrawals. Click To Tweet

What do I do if I want a Roth IRA but I make too much money?

A listener recently asked what he could do if he makes too much money to contribute to a Roth IRA. One good way to open a Roth is by doing a conversion. Although there are income limitations on Roth contributions, you can convert as much of your IRA as you please. One reason that you may want to begin converting your IRA to a Roth is to avoid the tax burden that may come with the required minimum distribution (RMD) at age 70 ½. As you approach retirement it’s a good time to start thinking of your lifetime tax bill rather than your year to year tax burden. Would you rather pay a bit more in taxes now or a lot later?