Tax Nirvana
I started contributing to a Roth IRA in 2000. (Actually in 2001 for the year 2000.) About three years ago, I browsed a book about IRA in B&N. How someone can write a whole book about the subject I don't know, but I did find some facts that piqued my interest.
According to the rules, a surviving spouse has the option to treat the inherited IRA as his/her own. If the IRA is a Roth one, then there will be no minimum distributions at age 70 1/2.
Suppose every person first gets married at age 20 and lives to the age of 100. How does my system work? John at age 20 marries Jane, age 60, whose late husband, Jack, just passed away at age 100. Jane gets all of Jack's Roth IRA as her own, exempt from estate tax, and can immediately withdraw however much she needs, since she's older than 59 1/2. The unused portion grows without tax inside the account. 40 years later, Jane passes her Roth IRA account to John, who then marries a 20 year old girl Joan. As long as everyone involved exercises self control to keep the account from draining, the snowball just keeps rolling.
Imagine it: once money goes into that account, it kisses IRS a forever goodbye and grows freely. Isn't that truly a tax nirvana? Of course, then marriage would become just a legal means to preserve wealth as one best can, and an infinite number of problems will arise.
Well, there it goes, just another one of my crazy ideas.
According to the rules, a surviving spouse has the option to treat the inherited IRA as his/her own. If the IRA is a Roth one, then there will be no minimum distributions at age 70 1/2.
Suppose every person first gets married at age 20 and lives to the age of 100. How does my system work? John at age 20 marries Jane, age 60, whose late husband, Jack, just passed away at age 100. Jane gets all of Jack's Roth IRA as her own, exempt from estate tax, and can immediately withdraw however much she needs, since she's older than 59 1/2. The unused portion grows without tax inside the account. 40 years later, Jane passes her Roth IRA account to John, who then marries a 20 year old girl Joan. As long as everyone involved exercises self control to keep the account from draining, the snowball just keeps rolling.
Imagine it: once money goes into that account, it kisses IRS a forever goodbye and grows freely. Isn't that truly a tax nirvana? Of course, then marriage would become just a legal means to preserve wealth as one best can, and an infinite number of problems will arise.
Well, there it goes, just another one of my crazy ideas.
posted by moira at 11:07 PM
2 Comments:
Don't forget 401K, which can be rolled over into an IRA.
$4000 a year, I'm sure Bill Gates won't worry about that. But for us laymen, it might make sense to take advantage of this loophole, as long as you can know for sure you won't die before you can find an "heir".
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