Your Retirement Questions Answered

Bob Carlson

Being “America’s #1 Retirement Expert” (Credit to my publisher for that title) is by no means an easy task. Each month, I provide my subscribers with a 2-part, 16-page monthly newsletter, a weekly hotline to analyze the latest market data and economic indicators, and a weekly e-letter in which I give my advice on a chosen topic.

The research needed for these publications means that I need to delve into the latest tax laws from the federal government, analyze the fundamentals of my current portfolio holdings and research the newest data from the multiple economic and sentiment indicators I track.

Sometimes though, I need a break from all that research and want to use my several decades of knowledge to help people on a more individual level.  My advice is constantly being sought by individual retirees who are concerned about making the right moves in their retirement plan. Alas, I often cannot respond to as many of the questions as I would like.

Below, I’ve compiled some of my most frequently asked retirement questions; I hope you will find them useful in implementing your own retirement strategy.


QUESTION: I have several stocks and mutual funds I’ve owned for years that have appreciated a lot. My financial planner recommended that I give some of them to charity instead of selling them. Is that a good idea?

ANSWER: When you’re charitably inclined, donating appreciated investments often is a better way to make your contributions than writing a check.

If you were to sell the investments, you’d owe capital gains taxes on the profits. If you’ve owned the assets for more than one year, the maximum tax rate is 20%. You might qualify for a lower rate if you are in one of the lower tax brackets. You’d have only the after-tax proceeds of the sale to spend, invest or donate.

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Suppose that instead of selling, you donate some appreciated stock to charity. You’d owe no capital gains taxes or other taxes on the appreciation that occurred while you owned the property. The charity also wouldn’t owe any capital gains taxes. It could sell the stock immediately and use the full proceeds (after transaction costs) in its charitable activities.

In addition, you could take a charitable contribution deduction for the fair market value of the stock you donated. Notice that is a deduction for the fair market value, not for your profits. When it’s a publicly-traded stock, you use the closing price on the day you donated the stock to compute your deduction.

There are a couple of caveats. When you’re a high-income individual, your charitable contribution deductions might be reduced if your adjusted gross income exceeds $309,900 if you are married filing jointly or $258,200 if you are single.

Also, you can’t deduct more than 30% of adjusted gross income when you contribute appreciated property to public charities. If you give to a different type of charity, such as a private foundation, the limit might be 20% of adjusted gross income.

When you hold the property for one year or less, it is considered short-term capital gain property. You then deduct the fair market value from the amount that would have been ordinary income if you’d sold the property. Essentially, you deduct only your cost basis in the short-term capital gain property.

You don’t want to contribute property that has declined in value. You’ll deduct only your basis in the investment. Instead, consider selling the investment and deducting the loss.

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QUESTION: I’m a divorced woman in my fifties who is thinking of remarrying. Friends have told me remarriage could affect my Social Security benefits. Would I lose anything by remarrying?

ANSWER: When a person is married, he or she is entitled to the higher amount of his or her earned Social Security benefit, or half the other spouse’s earned benefit at full retirement age. Also, after one spouse dies, the surviving spouse is entitled to his or her earned benefit or what the other spouse was receiving at the time of death.

A divorced spouse still might have rights to benefits based on the former’s spouse’s earnings record. If the marriage lasted at least 10 years, then a divorced spouse who remains single can claim retirement benefits based on the higher of his or her earnings record and the former spouse’s earnings record. When a divorced person remarries, he or she loses rights to retirement benefits based on the former spouse’s earnings record.

A divorced person also might be entitled to survivor’s benefits based on the former spouse’s earnings record. The rights depend on the circumstances:

If a person is divorced after a marriage that lasted at least 10 years, and the ex-spouse passed away after the divorce, the surviving divorced spouse is entitled to a survivor’s benefit based on the deceased spouse’s earnings record as long as he or she doesn’t remarry until after age 60. (The same rule applies to someone whose spouse passed away while they are married; the surviving spouse is entitled to survivor’s benefits as long as he or she doesn’t remarry until after age 60.)

Bottom line: You lose rights to retirement benefits based on your ex-spouse’s earnings record if you remarry. You also lose rights to survivor’s benefits based on your ex-spouse’s earnings record if you remarry at age 60 or earlier.

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QUESTIONMy wife and I are in our seventies. She’s  beneficiary of an IRA she inherited from her brother. She’s required to take required minimum distributions (RMD) from the IRA which we don’t need. Can she use the qualified charitable distribution exclusion to make a contribution to our account at the Schwab Charitable Trust? Can she transfer the entire IRA to the charitable trust at one time so we don’t have to deal with the RMDs each year?

ANSWER: The IRA qualified charitable distribution exclusion is perhaps the best way for those ages 70½ and older to make charitable contributions. You simply tell the IRA custodian to transfer money directly to the charity.

The distribution isn’t included in your gross income, but it counts toward your RMD for the year. You don’t receive a tax deduction for the contribution.

Taxpayers ages 70½ and older can use the provision to exclude up to $100,000 of IRA charitable distributions from their gross incomes each year. Probably the only better way to make charitable contributions is to donate appreciated investment property, such as stocks or mutual funds.

A beneficiary of an inherited IRA can use the qualified charitable distribution exclusion when the beneficiary is at least age 70½. But the exclusion applies only when the contribution is made to a public charity. Contributions don’t receive the exclusion when they’re made to private foundations, donor-advised trusts, and similar entities.

It looks like you can’t use the exclusion as you planned, but you can use it to make contributions to a public charity.

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