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Episode #622 - Year-End Planning: RMD Rules for IRAs & Inherited IRAs

Roger: Welcome to the show dedicated to helping you not just survive retirement, but to have the confidence to lean in and really rock it and create that great life. My name is Roger Whitney. I am a practicing retirement Planner with over 30 years experience walking life with clients. I'm also founder of Agile Retirement Management, a retirement planning firm and I'm excited to hang out with you today and continue this series on year end action items.

IN TODAY’S EPISODE, ROGER WHITNEY COVERS THE RULES AROUND INHERITED IRAS, EXPLORES WAYS TO FOSTER DEEPER AND MORE MEANINGFUL CONVERSATIONS DURING THE HOLIDAYS AND BEYOND, AND ANSWERS LISTENER QUESTIONS.

Roger: Today in the retirement toolkit we're going to talk about the rules around inherited IRAs. And then in our Retirement life lab, since we're about a week before Christmas and the holidays, we're going to talk about how do you have deeper or more enjoyable conversations during the holidays but even throughout the year. Some good lessons there. I was really impressed with my brother in law who shared this with me. In addition to that, we're going to answer some of your questions. So let's get this party started.

RETIREMENT TOOLKIT: INHERITED IRAS

Roger: Today in the retirement toolkit we're going to talk about the rules around inherited IRAs. So these are IRAs that you inherit because you were named beneficiary from someone that has passed away. Now these rules fundamentally changed in 2019 with the SECURE act and they become more complicated. So if you've inherited an IRA or a Roth ira, we'll touch on those two or you think you're going to. It's important that you understand these rules so you can not run afoul of the IRS and re have Incur a penalty. And that happens all the time. So this is somewhat complicated. We're going to do this verbally and you might be running or doing the dishes or driving whatever it is you do when we hang out. I'd love to know what that is. Actually we're going to share a resource in our weekly email, the Noodle. Now the Noodle is our newsletter that comes out every Saturday morning that goes deeper with coaching insights and gets links to the show. But you also get curated resources and in this case we're going to share a flowchart of the rules for inherited IRAs. That way you can just follow along and understand what it is you need to do if this impacts you. In addition, the Noodle, if you hit reply it comes right to me and my team. So it's a great way to have a two way connection. So you can sign up for the Noodle at thenoodle.me and we'll send that email to you every Saturday.

DIFFERENCES BETWEEN ELIGIBLE AND NON-ELIGIBLE DESIGNATED BENEFICIARIES FOR INHERITED IRAS ARE EXPLAINED.

Roger: All right, so let's go into inherited IRAs. The first thing we need to know is there are two primary definitions of the beneficiary that inherits the account. So I'm going to simplify this because there's more, actually three, but we're just going to talk about two. The first is what's called an eligible designated beneficiary and then a non eligible designated beneficiary. So we're going to talk about the designated beneficiaries. So if you are an eligible designated beneficiary, this is the category you're going to fall in. You're either going to be the surviving spouse of the person that passed, the minor child of the person that passed away, not grandchildren, a, disabled individual, or somebody that's chronically ill. And those are the IRS's definitions and certifications.

So if you are a surviving spouse or a minor child, you're considered what's called an eligible designated beneficiary, sometimes abbreviated to edb. So if you are one of these, you're going to have the most flexibility in how you pull money from this inherited IRA. We're just going to stick with traditional IRAs at the moment and then we'll clean it up, Roth iras at the end. So if you're the surviving spouse, you have the most options you can. One, just simply take the IRA and roll it into your own. So here's an example. John and Betty are married. Betty passes away. She has a million dollar IRA that has John as the designated beneficiary. John, because he is the spouse, can just choose to move her IRA into his IRA and just treat it like it's his own money in terms of rules, no required minimum distributions related to the inheritance. So a surviving spouse can just move it into their own account and just treat it like their own. The other option that John would have is that he could put it into an inherited IRA and follow the required minimum distributions based on a single life expectancy for him and basically treat it like an inherited IRA. That means he's going to have requirements in how quickly he starts taking this money out. Now why would John do that? Why would he not just put it into his own IRA? Well, one reason might be that John is under 59 and a half and he wants to be able to access some money from a tax deferred account without penalty. Well, if he just moves it into his IRA once his wife passes, well then now he has to treat it like his own and wait until he's 59 and a half to take money out without penalty. Whereas if he keeps it as an Inherited ira, he's going to have to do normal distributions, but he can access more than that amount prior to age 59 and a half. So that might be a reason. So that's surviving spouse. Now our minor child. M. Let's say a minor child, they would treat this as an IRA and take out a little bit a required minimum distribution based on the child's life expectancy starting in the year after the the person passed away. And then once they reach age of majority, which is generally 21 years old now, they become a non eligible designated beneficiary. And we'll talk about those rules in a minute. So critical there with the minor children, it has to be the own, the owner, the person that passed away, their child, not their grandchildren. So this doesn't apply to grandchildren. And then for those other designated beneficiaries, eligible designated issues chronically ill or disabled, there are special rules that we're not going to address here. All right, so that's if it was a surviving spouse or a minor child or one of these other categories.

What if Sally inherits a million dollar IRA from her mother Mary? So let's say Mary is the mom and Mary passes away and Sally inherits $that million IRA, she would be what's called a non eligible designated beneficiary. See why we're going to give you a flow chart in the Noodle. Go to thenoodle.me, it's much easier to follow that way. So she's going to be a non-eligible designated beneficiary. Generally this is going to be adult children, this is going to be grandchildren, pretty much other individuals, neighbors, anybody you put on as a, you know, cousins, nephews, those types of things. So if they're a non eligible designated and that's from say going from a parent to a child. In this example with Mary to Sally.

Now the ten year rule comes into play and this is what changed in 2019, which essentially says that if you, if you're a non eligible designated beneficiary, you must completely empty the account by December 31st of the 10th year after the death. So this account can't be stretched over your life expectancy like they used to be. You got to get it out within 10 years. Now how you get it out, well it depends on whether the deceased owner had started their own required minimum distribution. So let's use an example. Let's assume we've got Mary the mom. Mary (mom) gave to Sally (daughter) and let's say Mary (mom) was 68. So she had not started her required minimum distributions so she hadn't reached what's called the required beginning date, another acronym, rbd. So since Mary mom passed away before her required minimum date or and Sally inherits it, the money would go to an inherited IRA for Sally. And now Sally has no annual required minimum distribution from the account for the first nine years. So there's no required minimum distribution, but the entire balance has to come out by the end of the 10th year. So let's say this happened in 2025. Sally inherits a million dollar IRA. It goes into an inherited IRA for the benefit of Sally. She doesn't have to worry about required minimum distributions this year, next year, the year after, not for the next nine years. But by the end of the 10th year, that entire million dollars has to come out to Sally and the account has to be closed. And if it's a traditional ira, that means any monies that come out would be taxable as income to Sally. But she has total flexibility on the timing of when she takes that money out. So for Sally when she's doing her retirement planning, she's going to want to factor in that she has access to this money for the next 10 years and so she can choose with some flexibility over the 10 years when she takes it out and realizes the income. And if she's under 59, it would come out without any penalty. So she could access at age 55 if she decided to retire then or if she had a low income year. But she's going to want to plan Sally for the timing of that income and she's going to consider what her normal income is and try to move more to lower tax years because if she doesn't and she gets close to the 10th year, she's going to have to take all of that money out in that 10th year and that could create a huge tax year because of not managing year by year. So that's Sally when mom dies at age 68. But let's assume now that mom is 76. That means she's already reached the required beginning date for required minimum distribution. So Mary mom was taking required minimum distributions when she passed away. Then she passed away. Mary, Sally inherits the million dollars from Mary mom. Now, how are the rules different? Well, the way the rules are different. And this had to get clarified by the IRS because when they came out with this in 2019, they didn't tell us anything. So the IRS waived some penalties related to this when they came out to clarify and 2025 is the first year that the waiver of the penalty is gone. So if you've inherited an IRA from someone that was doing RMDs when they died, you're going to want to pay attention. So now what does Sally do with this IRA? This million dollar IRA. So again, she has to have it empty within 10 years. So that stays the same. But the difference is because her mom was already taking required minimum distributions, Sally has to take required minimum distributions based on Sally's life expectancy. And there's an IRS table that helps calculate this. You don't have to worry about that. There are great online calculators. Schwab has one, Fidelity has one. We'll put a couple links to them in the noodle. That will help calculate it. It's generally not a lot of money relative to the whole.

So actually, let me just do an example. Let me go to Schwab's calculator and just put this in here. So I'm going to enter the data. So it's going to ask you what was the owner's date of birth? And that's going to be in this case, Mary Mom. And let's assume it's January 1, 1990. 1949. About 75 years old. Right. And then it's going to ask for the date that they died. I'm going to say they died January 1, 2025. So that means they have already started. Required minimum distributions. It's going to ask, is this a non eligible designated beneficiary or eligible designated beneficiary? Well, Sally is the daughter, and so that's a non eligible designated beneficiary. So we're going to check that box. And then we're going to put in Sally's birth date. And we're going to say her birth date was January 1st of 1967. So she's 58 years old. So the calculator is going to go to the uniform life table, which the IRS publishes. Again, you don't need to do any of this. I'm just going through the calculator and it's going to take a million dollars and use the life expectancy for Sally, which is 23.7 years, and divide that into a million. And that means the required minimum distribution in this case for Sally would be $42,194. Sally has to take that out each year over the 10 years because she inherited after her mom had started RMDs. But she still. It's like 4.2% of a million but remember, she's going to do that, say in year one, but she still has to empty that entire account by the end of the 10th year. And that's the rub that for those of you that inherited inherit IRA is that we got to use that as a planning opportunity of when can I take more than my required minimum distribution in this case so that I can manage the tax liability because if I just ignore it, then at the end of nine years, when you get into the 10th year, whatever that million, minus the withdrawals, plus the growth is, you're going to realize all of that as income in that year. So that's the basics of inherited IRAs. We'll have the flowchart in the noodle.

ROGER TALKS ABOUT ROTH IRAS AND HOW THEY WORK.

Roger: Now let's talk about Roth IRAs. How do they work? Well, Roth IRA is much simpler because there are no required minimum distributions on Roth. So if we take Mary, mom and Sally again, same fact set. Well if they're eligible designated beneficiary, you can stretch the required minimum distributions over their lifetime until they reach age, you know, a minor child, it's age 21, then the 10 year rule applies. If they're a non eligible beneficiary, which we're talking about in this case with Sally, the good thing is there are no required minimum distributions year by year, but it still has to be empty by the end of the 10th year. So it doesn't really matter about RMDs because there aren't any with Roth IRAs. Those are the basics. And so this time of year, if you haven't already, you want to look at this to see one, am I required to take money from an inherited IRA that I received so you don't get, you know, don't have an IRS penalty and two, even if you aren't, should I take some money from this inherited IRA to manage my tax liability knowing that we got this 10 year clock ticking? All right, so we'll have that resource in the noodle. But now let's move on to the Retirement Life Lab.

RETIREMENT LIFE LAB: ROGER EXPLAINS HOW APPROACHING CONVERSATIONS WITH CURIOSITY AND INTENTIONALITY, ESPECIALLY WITH OLDER FAMILY MEMBERS OR THOSE WITH DIFFERENT INTERESTS, CAN CREATE MORE MEANINGFUL AND ENRICHING INTERACTIONS.

Roger: Now it's time to focus on the Retirement Life Lab where we focus on the non financial aspects of life. Now this is the first time I'm calling that on the show. Nicole is probably wondering why I'm calling it that, but I like that name. That is actually the name of the masterclass that we have in the Rock Retirement Club. for the non financial realm. Rather than call it a masterclass, we decided to call it the Retirement Life labor because it's an experiment. We're always n of 1 and trying to improve our life in energy and mindset, in relationships and passions that keep us curious. So I thought why don't we just call it that here too? Hopefully that doesn't cause confusion. I'm sure Nicole will let me know because she's wonderful that way. So for now, at least for today, we're calling it the Retirement Life Lab. And what I want to focus on now is how to have more enriching conversations, especially when you're around people that you find it difficult to do. So. And we're about eight days before Christmas, so maybe you're going to go to Christmas and you're going to be with extended family, father in law, your parents, aunts and uncles and cousins, people that you don't interact with, as much and maybe don't have a lot in common with. And we want to be intentional and make rich encounters with them. And this is something we could practice all throughout the year for sure. And why I'm bringing this up is my brother in law and I were having a conversation over Thanksgiving and he went to his in-laws for Thanksgiving and he gave me permission to tell this story. And he, his father in law is 87 years old and cognitively is not all there. I mean he's there but he doesn't have dementia. But he's 87 years old. He's just, his world is getting smaller and physically he's dealing with a lot of things. So Kevin's normal interaction with his father in law is his father in law telling the same stories over and over, even in the same evening. And Kevin went to this Thanksgiving and he was working on his car, replacing rotors and was frustrated with that. So he didn't come in with a great attitude and he was there and he got frustrated because there was nothing to talk about that Kevin liked to talk about. He's a technologist, likes AI, likes new stuff as you know, very expanded, you know, loves to explore lots of different things. And his father in law just isn't capable of doing that or interested in doing that. He retells the same story of him being in the Navy. He was on ships in the Pacific and was one of the last, I think, sailors that participated in nuclear testing in the Pacific actually has skin cancer. A lot of medical issues resulting from that. And there's a whole story around him having get the military to acknowledge this because all that stuff was done before anybody really knew what was going on. And anyway, Kevin went to this and was hearing the same stories again and was frustrated and he came home and he felt bad because he didn't feel like he gave it a good try to have an enriching interaction with his father in law, who he loves. He's known him for years. So he started to explore how can he be better at this? And we were having this conversation, and the way Kevin approached it is he did some research online with AI and other things and talked about his grandfather and asking, how can I have more enriching or, not grandfather, father in law, how can I have more enriching conversations with this 87 year old? And what he discovered was that when you're 87 years old, it's likely that you have some cognitive decline. Your world gets smaller and your ability to grasp new concepts and go down rabbit holes of new things is just impaired. So trying to talk to his father in Law, who's 87 and has a lot of physical issues about AI or current events might not be as fulfilling. They just might not have the capacity to do that or the interest and just acknowledging that because we forget that. And then the next thing that he learned is, well, why does he keep telling the same stories over and over again? Well, and this makes sense when you step back a little bit and get perspective is, as we get older, we do it now, but as we get older, when we repeat the same stories, it helps remind us of identities that we've had that were important to us. In this case, it's being in the Navy, being involved in the nuclear tests, all the aftermath of that physically that defined a good portion of his life, and him having to deal with all the skin cancer and everything else. And retelling those stories reminds him of these identities that he's had. And it also helps him hold on to the relevance of what he went through in his life. Because as you get older and he's 87 and somewhat feeble, having relevance is important. So reliving important times via storytelling. And so that's why there's a repertoire of stories that we generally go back to over and over. I actually see this with my best friend Eric, when we're together, how many times we've retold stories of us in college and things that were, you know, embarrassed about in the time. But now our funny stories, we do that now all of us retell stories, we have our own repertoire. But as we get older, we may have less of a repertoire of stories.

And so the new strategy that Kevin came up with through his research is it's. I got to understand and recognize his limitations. I love my father in law and have been married for 35 years. I love my father in law, but I got to recognize his limitations and not expect him to want to talk about AI and all the stuff that I'm interested in. And it's likely not a good strategy to think that we're going to take them off of the stories that they're going to repeat over and over. But what we can do is turn the script and identify threads to pull on to learn new aspects of that story. And that becomes more interesting for say, in this case Kevin, the listener of the stories, because now you're switching from oh my goodness, I got to hear this again, to hmm, I'm curious about this. So here's what Kevin did. he knows that his father in law is the Navy that is involved in these nuclear tests that created, you know, one of the last ones, I guess they did in the Pacific. And so he started researching that with chat and AI and other tools, and there's a lot of history there. So Kevin went down this rabbit hole of, wow, there's a lot going on there that people didn't know about. And so Kevin started texting his father in law after the fact and started to ask questions to flesh out some of the details related to his experience. That obviously is very important to him in being in the Navy and being part of this. And Kevin had more context because he turned on his curiosity light. And now when he interacts with his father in law and he hears the same story, he can ask questions because he has more understanding of, the context of the story and pull out threads and be curious to learn more from somebody that was actually there when this all went on. So think about what that does. That allows Kevin to take a posture of being curious and engaged even though he's hearing the same story. It also helps him to help his father in law by asking questions because there's a little bit of intentionality there to flesh out the story so they can recall it more vividly by pulling out things that are part of the story that they may have forgotten in their normal telling of the story. And this becomes a connection moment for Kevin because he's connecting with his father in law, somebody he loves. But this also becomes more enriching for his father in law because he gets to share his identity and his relevance in this season and gets to have a more expansive story because Kevin's asking really good questions. That's pretty powerful if you think about that. Now expand that outside of Christmas, it could be holiday parties. You're Going to. It could be you're talking to a 20 year old nephew that you don't know what to relate to. A little bit of intentionality, to ask questions about things that are important to them that can create a more enriching experience for all of us. So this is something we can expand day to day, not just simply during the holiday times. But I love that story. I love Kevin, and I love his intention of wanting to connect with somebody he really cares about. All right, with that, let's go answer some questions.

LISTENER QUESTIONS

Roger: Now it's time to answer some of your questions. If you have a question for the show, you can go to askroger.me and leave a written question or an audio question. We'll do our best to help you on the show.

IRA ASKS WHAT TO ASK A FINANCIAL ADVISOR’S TEAM TO UNDERSTAND THEIR RETIREMENT PLANNING SERVICES AND TEAM LONGEVITY.

Roger: Our first question is an audio question. So audio Ira gets a fast pass. Let's hear from Ira.

Ira: Hey Roger, I've been listening to the show for a couple of years now and really appreciate everything that you and your team do. I'm about five years away from retirement and we've been working with a family financial advisor for the last couple of decades. The question that we have is what should we be asking of their team to see how they view and what services they can offer us in retirement and how, how different retirement planning and retirement operation is than being a financial advisor. Moreover, what should we be thinking about in terms of looking at the team and their longevity and what bench they have when the lead financial advisor inevitably retires? Thanks again. This is Ira. Appreciate everything you do.

Roger: Hey Ira, thanks so much for the question. First thing I heard was that you've been working with them for a couple of decades, which means that you really have a lot of relational currency with this advisor and hopefully the team. That common bond of understanding stories and having a shared history is really important when you to build trust and an understanding of why we do and what's the thing behind the thing. So it's that's not easily given up. And so ideally as you're within five years of retirement, then that probably means that you maybe have been planning for retirement in a theoretical sense and trying to grow assets. But you're coming to a season of change in your life journey, which means that the kind of advice that they are going to be giving you needs to change along with that season of life. And redefining that relationship in terms of what you want to get accomplished in your retirement planning is important because if you've been working with them for decades, you all have Been doing the same thing in the same way probably for years. And there's a lot of assumptions that need to be about who you are and what you want, how you want to be communicated, the services you want that need to be renegotiated with. And they need to acknowledge that. Right, because they have habits, just like you have habits. So the expectations of these meetings need to shift. And doing it within five years and having open discussions is a great way to do it. And so you've been working with them for decades, which means the core people of the team are getting older. Look at me, I've been doing this 30 years. I'm 58 years old, and I started relatively young. I'm getting older.

When I work with a client or a potential client, the questions come up, well, what about you, Roger, when you pass, what's going to happen? That's a really important question. Because ideally, Ira, I think you'd want a team or a person that will be there throughout your journey. You don't want to have to be switching when you're 70 or 75, because now's the time to get that dialed in. That includes your CPA, by the way. So that doesn't necessarily mean it has to be the person that you've been dealing with. It has to be the team. So one thing you're going to want to explore is, well, tell me about the players on your team. Give me their names and what their role is and what you see for their future. That's going to be important. I can only use myself as an example. That's one reason why Troy joined our team two and a half years ago. And he's 31 and he's a retirement specialist. and he's integrated with the process because he knows the process that we use, and he's 31, and he doesn't have my wisdom and expertise, but he has other attributes that are just as important. It also means that he can slowly build relational currency with clients. So if and when Roger retires or passes away, it's not really that big of a handoff. We don't want to have this happen in the last second. So who on their team is the second to the senior person? What kind of relationship do you have with them? What is their expertise? And that goes with other members of their team as well. You want to have multi generational people on the team. You don't want just all old and younger. So, like, as an example, on our team, I'm 58. I'm the old dude. We got Troy, that's 31, he's the young dude. We got Tanya, who's my partner, who's 44, she's the middle lady. We got Laura Lee, who's in her 40s, who's the middle lady. And we got Erin, who's in, I don't know if she's 50 or so, she's the middle lady. So we have multi-generational people on our team. You want to find out if they have that and if not, what's their plan for that because it may not be in place because it's hard to find great people. So that's one thing you want to explore. The second thing you want to explore is what specialties do they have. Now they may not do your taxes, but in retirement tax planning is much more important than it is in regular life because you have more control over how you realize income. And multi year tax planning, not just thinking about what you pay this year, but what it looks like over a series of years is going to be important. So you're going to want to have somebody that has some expertise in that. And that is generally where firms lack. Because from a regulatory perspective, especially if we're at a large firm, taxes are sort of a taboo. You can't talk about them from a compliance perspective. So first I want you with that preamble. Here would be my approach. Ask questions, put on your curiosity hat and have a formal meeting and be curious, ask them. And I'm gonna give you some questions to ask about. But then as you're asking the questions, be curious. Ask follow up questions when you are getting answers, what you know, and we'll go over the questions. But ask follow up questions, ask another follow up question. Because the deeper you can drill into the answers, the more you're gonna be able to identify how thorough their process or their answer really is. Because it's very easy to sound like an expert on the surface nowadays. Not that difficult, especially if they've been doing this for years. But you want to know the depth of knowledge on the topics and questions you're asking. Not so much do they have any knowledge.

Another tactic you can do from an approach standpoint is to use analogies. Ask for analogies to explain a point. And one indicator of a depth of knowledge is when people can use analogies outside of their domain, like using a surfing analogy to talk about Roth IRAs. When they can go outside of their domain to use an analogy. Usually that means there's some integration of that. And then talk directly to the different Team members. So you say it's a team. Let's assume it's multi-generational because you don't want to have to do this again, ask them similar questions to see if everybody is talking the same book is what we might say in the business. Do they all follow the same process? Do they all use the same words to describe that process? That shows that it's much less of a cult of personality of the senior person and more of a solid approach that everybody is using with their clients. So what questions should you ask? Well, we'll put a link to our how to interview a financial planner which I need to update to make sure it's specific to retirement planners. But this will still work really well. There's a list of questions there that you're basically re interviewing them, but it's in a more familiar way. Those questions are going to be still relevant, but the key questions are what's your process for retirement planning in detail? How do you help somebody create their vision and their goals and then ask follow up questions related to that. Remember, this is about them giving you the depth of how they do it. And what you're looking for is that they actually have a process that is well thought out, that is congruent, regardless of who you talk to because that means they really, they have a process. So how do you help people create a vision? How do you help them define their spending goals? What do you think about the asymmetry of life when you're older? If you're familiar with that in the presentation I give on that about the Go go years. How do you make sure that we don't run out of money? How do we plan for spending money early too ask those questions. How do you determine if it's feasible? What's your process for doing a feasibility study to see if this is actually possible given the resources? Okay, great. How do we make, how do you make it resilient? How do we plan out our paycheck so we can have confidence that life storm, whether it's a market downturn or long term care event, doesn't derail the plan? How do I have clarity of exactly how my paycheck's going to be created? What's your process for creating a paycheck specifically? If I need X amount every year, how's that going to work in year one and year two and year three? And what you're looking for is that they've thought about it in a detailed way and they have a specific protocol to follow and then well how do you think about optimization? When do we talk about Roth conversions or taxes? Ideally, it's after those first three. Another question would be, well, what is your investment philosophy for retirement and creating a paycheck? How does it change relative to the accumulation that we've done over the years? Again, the question. Ask questions behind those questions. How do you approach tax planning for retirees? Who on your team specializes in retirement planning? What education do they have or what education are they doing? Who will I work with and for what? Okay, you have five members on your team. I, primarily talk to you. Who else is on your team and what roles and when will I communicate with them? And honestly, Ira, we're dealing with this internally because we expanded our team and we're finding that we didn't explain this to clients because we have people that are more tax specialists, people that are more the basic, you know, the fundamental planning specialists and then the more complicated planning specialists. And our clients, we never explain to them who they're going to interact with. And that's on me. So you want to understand, well, when do I talk to Sally or when do I talk to Bob if they're on your team? And then what's going to happen when you're gone? What, what's the succession plan? These are some questions along with the handout. But I think this is a great time to renegotiate this relationship so you guys can change seasons and have a firm that's going to treat you differently because you're entering a new season. That's a beautiful thing. If you can help redefine how you want to engage with them. So that. Those are my thoughts on that. Hopefully that was helpful. Ira.

MARY JANE ASKS IF SHE CAN USE HEALTH SAVINGS ACCOUNT FUNDS TAX-FREE TO PAY FOR PRIVATE HEALTH INSURANCE PREMIUMS BEFORE MEDICARE ELIGIBILITY.

Roger: Our next question comes from Mary Jane looking to fund her health insurance. And she says, hey, Roger, I love the show. I need to obtain private medical insurance for 12 months prior to turning age 65. Medicare. Can I withdraw Health Savings Accounts funds tax free for medical insurance premiums? That's a great question. So let's walk through this. Generally, using your health savings account for insurance premiums is not allowed. So you can't withdraw from an HSA account tax free for regular health insurance premium for an employer or individual plan, employer sponsored health plans, etc. There are some exceptions, though. You can draw from the HSA tax free to pay for COBRA continuation coverage, and you can draw from HSA to pay part B of Medicare, Part D of Medicare, Part C of Medicare and Part A if you must pay. So you're not going to be able to use your HSA to withdraw premiums tax free. If you go into the ACA marketplace for health care premium, it's only for COBRA continuation coverage. So maybe look at using your COBRA and compare that to what you might pay in the aca. If you're really looking at using your, HCA or hsa. So many acronyms to cover your insurance costs. All right, now it's time to go set a smart sprint.

SMART SPRINT

Roger: And we're off to set a little baby step you can take in the next seven days to not just rock retirement, but rock life!

All right, in the next seven days, as you prep for a holiday event or for a Christmas event, or for a New Year's event, any place that you're going to interact with people that you don't see every day and maybe you love but you have trouble connecting with, I challenge you to do a little research and come in with your curiosity curiosity hat on and pull a thread and just ask questions. This will enrich the experience for them and you might learn something new too.

CLOSING THOUGHTS

Roger: All right. Next week on the show we are going to talk about the basics of charitable giving. In addition, we're going to answer some more audio questions on dropping my financial advisor, fun buckets, a whole bunch of good stuff. So excited to hang out with you. I hope you're having a wonderful holiday season. Talk to you next week.

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