(Image credit: Getty Images)Almost everyone has an IRA, 401(k) or similar retirement savings account. The purpose is to have that money available when you stop working. But what if you don’t need it right away?This question was prompted by readers who want to know how to create options with the income from their IRA to minimize taxes and maximize liquidity — rather than merely taking the required minimum distributions (RMDs) each year. Their primary goals are about longer-term liquidity and legacy, instead of just income.In my last article, How Combining Your Home Equity and IRA Can Supercharge Your Retirement, I wrote about how most retired families own an IRA and a home, but very few are considering how they could work together in a plan for retirement income. The retiree we frequently cite as an example — 70-year-old Sally — used the combination of her home and her IRA to generate immediate income equal to 6.5% of her $1 million in IRA savings.Subscribe to Kiplinger’s Personal FinanceBe a smarter, better informed investor.
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Sign up for Kiplinger’s Free E-NewslettersProfit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.Profit and prosper with the best of expert advice – straight to your e-mail.This article focuses on a version of this IRA/home combination that defers distributions and lowers taxes and at the same time increases the long-term growth in the account value, liquidity and legacy.How an IRA/home plan meets liquidity and tax objectivesSally’s twin sister, Susan, is concerned about costs for long-term care and other health-related events and wants to maximize liquidity so she can pay for these costs in coming years — and not be a burden for her kids. She does not own long-term care insurance.She has several children and grandchildren and wants to leave a large legacy. In addition, she’s concerned that she may have to help with funding the grandkids’ college education. To do all of this, she needs to lower her IRA distributions and her taxes.Susan and Sally share the same adviser, who recommends an allocation of their identical resources — $1 million in their IRAs and $1 million in the value of each of their homes — in the same set of planning components below.(Image credit: Jerry Golden)Home equity can serve several functions during your retirement. Learn more about that program, called H2I, in my article How to Add Home Equity to Your Retirement Income Planning.Susan’s objectives are different than Sally’sStarting income. Sally wants and needs $65,000 per year to start and to have income grow at 2% per year. Sally has LTC insurance and is paying those premiums. Susan has a higher pension and Social Security benefit. Plus, she wants to minimize taxable income and is OK with a lower starting income.Liquidity at age 85. Sally is OK with having $1 million in liquidity at 85; Susan wants more like $1.5 million because
Gio. Gen 9th, 2025
