Bob Carlson

RMDs can be made in either cash or property, and there might be good reasons to distribute stock or other property.

Many solid retirement plans fall apart during the solo years after one spouse passes away, because the plans do not account for key changes.

Qualified Charitable Distributions (QCDs) from traditional IRAs are increasingly valuable for those 70½ and older, especially after the One Big Beautiful Bill Act. This act made the doubled standard deduction permanent, limiting tax benefits for many charitable givers, though it introduced a small non-itemized deduction. QCDs offer significant advantages: they are excluded from gross income, reducing taxes and Medicare surcharges, and count towards Required Minimum Distributions (RMDs) tax-free. This makes them ideal for satisfying RMDs or lowering Roth conversion costs. Key rules include being 70½+, direct transfer to a public charity, and an annual limit ($115,000 in 2026). Taxpayers should maximize 2026 QCDs now and plan 2027 contributions carefully, ideally making QCDs early in the year to avoid RMD pitfalls.

Federal employees often wonder if their Thrift Savings Plan (TSP) is sufficient for retirement. Comparing individual balances to age-group averages and medians offers a valuable benchmark. Years of service can provide even more valuable data. The 2025 overall average TSP balance was $198,000, with a median of $50,000. Generally speaking, average and median balances increase by age. Younger employees should prioritize maximizing contributions and embrace growth-oriented investments, while workers in their 60s must finalize comprehensive plans. Key factors influencing TSP growth include compensation, contribution rates and investment returns. To boost savings, employees should maximize contributions, utilize catch-up options and consider appropriate investment strategies.

Social Security's trustees estimate the trust fund will run out of money earlier than they estimated last year. But the new projection still could be optimistic.

Medicare continues to change, including new Part B coverage for GLP-1 weight loss drugs starting July 1st, priced at $50 monthly until 2027. This benefit is subject to prior authorization. There are concerns it could lead to supply shortages and patients will not receive sufficient counseling. In other news, a study found the three largest Medicare Advantage plans denied inpatient rehabilitation and long-term nursing hospital requests at higher rates than other plans. After years of financial strain from surging post-pandemic care, inflation, and stricter government policies, Medicare Advantage insurers are now reporting improved financial health. More predictable demand and favorable government reimbursement rates for 2026/2027 suggest a more stable MA market is on the horizon.

Estate planning is crucial, and now is a stable time to act. Begin by reviewing beneficiary designations for assets like IRAs and life insurance, as these often bypass wills and can lead to unintended heirs if neglected. Next, meticulously document all your assets and debts to aid your estate planner and future executors. Ensure essential documents like durable powers of attorney and advance medical directives are current and recognized by relevant institutions. Strategize your approach to probate, considering whether to use a living trust to avoid this lengthy process. Carefully select executors and trustees, anticipating and mitigating potential beneficiary conflicts. Don't forget to plan for digital assets and sentimental personal items, perhaps even leaving a non-financial legacy. Finally, commit to regularly reviewing and updating your plan, especially after significant life events, to ensure it remains effective.

It usually is not a good idea to name a trust as beneficiary of an IRA, because heirs often are penalized with higher taxes.

The IRS is actively penalizing IRA owners for not taking full required minimum distributions (RMDs), having enhanced its detection systems. Fortunately, the SECURE Act 2.0 has reduced the penalty for missed RMDs from 50% to 25%. This penalty can be further lowered to 10% if the RMD is distributed timely, typically before an IRS notice or within two years of the missed distribution. Taxpayers may also apply for a complete penalty waiver for reasonable cause by filing Form 5329, though approval is not guaranteed and the IRS's leniency with the new lower penalty is unknown. A denied waiver could mean missing the 10% window, resulting in the 25% penalty. While custodians often calculate RMDs, taxpayers should verify these amounts, as errors can still lead to IRS penalties.

Key Features, Benefits and Considerations Explained