Ask Triangle – Jan. 6, 2023
Des Moines financial advisors, financial planner des moines, financial advisor Des Moines, inheritance tax iowa, accountable plan, Iowa inheritance tax, family life cycle, small business financial advisor, certified divorce financial analyst, college savings iowa, financial affidavit, iowa 529, retirement planning iowa, qdro form, divorce checklist, retirement savings by age, average retirement savings, financial planner companies

Article by
Kendra Erkamaa, CEO & Financial Advisor Triangle Financial Services, Inc.

Book Now

During this “Ask Triangle” session, we shared some market updates and new legislation that will be relevant for the upcoming year.

Market Updates:

  • The Federal Reserve is planning to raise rates three more times while bond prices continue to decrease.
  • Employment numbers are down with job cuts, and wage growth is lower than expected.
  • Indicators we are watching: manufacturing numbers are at the lowest since May 2020 with the reduction of produced goods. Research partners are saying the next 3-9 months may see some level of recession.
  • If we slip into a recession, Federal Reserve may stop raising interest rates.
  • Setting up a time with the Triangle Financial team for a review will be important to ensure you are properly positioned for your current phase of life and/or if you’re particularly concerned about how the current market may impact your financial goals.

New Legislation

  • There are new tax guidelines for retirement income exemptions for 2023, including:
    • Iowans aged 55 and over are exempt from state tax for retirement income from IRA distributions, taxable pensions and annuities.
  • Secure Act 2.0
    • Effective Jan. 1, 2023, the Required Minimum Distribution (RMD) age increased to 73. If you turned 72 in 2022 or anytime before that, you are required to continue taking RMDs from an employer-sponsored retirement plan. In 2033, RMD age will further increase to 75 years old.
    • Roth employee retirement accounts are exempt from RMD beginning 2024.
    • 529 Plans can be rolled over into Roth IRAs if the account has been open for at least 15 years. Some of the contributions have to be from W2 income from the beneficiary.
    • Beginning in 2025, the catch-up contributions for 401K, 403b and 457b will increase to $10,000.
    • The penalty for failing to take an RMD reduced from 50% to 25% if corrected within a certain window. If you withdraw the RMD amount and submit a corrected tax return in a timely manner, the 25% penalty could be reduced to 10%.

Ask Triangle:

Question: If an individual who had a Roth IRA passes away, can the account remain a Roth IRA?

Answer: Yes, the spouse of a deceased account holder has options. There can be great benefits to inheriting a Roth account, including withdrawing contributions tax free. But you will want to keep the “Five-Year Rule” in mind. If the Roth account was less than 5 years old at the time of the original account holder’s date of death, any earnings withdrawn will be taxed. Be sure to contact us for guidance through this process.

Depending on how the Roth was inherited, for example if it was not through a spouse or direct family lineage (parent to child), it could be subject to estate taxes. Estate tax does not occur until wealth exceeds $12.6 million, but then up to 40% can be taxed. In Iowa, there is no estate tax if the account was inherited through direct lineage (parent to child), but when the account is divided among surviving children, inheritance taxes may occur.

Question: I am a recent homebuyer and want to look into refinancing. Is determining when to refinance a home something Triangle Financial Services can advise on?

Answer: While Triangle Financial doesn’t write mortgages, we do work with independent brokers who can help. We can, however, help you make an informed decision on whether it may be an ideal time to choose refinancing.

For example, when closing costs come into question, we can help by looking at the lifetime of the loan to provide a break-even analysis considering all of the refinance costs and percentage payment amounts may decrease.

When beginning to consider refinancing, look at what third-party sources are saying about the housing market. You can always reach out to our team to get our opinion on the current market and refinancing at that time.

Additional Resources:

Securities and Advisory Services offered through Harbour Investments, Inc. Member SIPC & FINRA.