Most people worry about outliving their money, but what if the opposite happens? What if your money is going to outlive you? Financial planning doesn’t stop once you hit 65. You'll still want to spend and invest your money.
Keep the IRS Away From RMDs
Don’t give your hard-earned income to the Internal Revenue Service (IRS) when you receive the required minimum distribution (RMD) from your retirement accounts. Instead, you should consider a qualified charitable distribution (QCD).When the federal SECURE 2.0 Act (Setting Every Community Up for Retirement Enhancement 2.0 Act) was passed, individuals over the age of 72½ became eligible to transfer up to $105,000 from an individual retirement account (IRA) to a qualified charity. This is tax-free.
All you must do is instruct your plan administrator to direct transfer up to $100,000 to an eligible 501(c)(3) charity. Because the money goes directly to charity and not to you, there aren’t any taxes to pay. That’s an important note. The money must go directly to charity. You can’t have the RMD go to you and then send a check.
You don’t need to itemize to use a QCD. So, you can still take advantage of the higher standard deduction that was implemented in 2018.
The QCD can be counted toward your RMD for the year. Instead of paying taxes on the mandated withdrawal as ordinary income, you wouldn’t owe any taxes on the amount given to a qualified charity. You and your spouse can both use the QCD. Each person would be able to give $100,000 apiece.
College Funds for Grandchildren
Some financial professionals will suggest grandparents contribute to a 529 plan for their grandchildren. This is also an estate planning strategy.- K-12 tuition
- college tuition
- apprenticeship programs
- student loan repayments
You can build an educational legacy for your grandchild.
In the past, the Free Application for Federal Student Aid (FAFSA) penalized students who received help from their grandparents. It affected the amount of financial aid the student received. Sometimes by as much as 50 percent.
But as of the 2024–2025 school year, 529 accounts owned by grandparents will not have this adverse effect on the grandchild’s financial aid.
However, some private colleges require a supplemental form called the College Scholarship Service (CSS) Profile in addition to FAFSA. Private colleges use the CSS Profile to award their own financial aid. And, unfortunately, they still consider a grandparent’s 529 account as income for the student.
Delay Social Security
Although this isn’t a tax write-off or a way to spend, it can be considered an investment.If you were born in 1943 or later, defer taking Social Security. Every year you defer, your benefits will increase by 8 percent up to age 70.
Stay in Your 401 (k)
Not all employers will allow this, but if your former employer does, and you don’t need the money, stay put.Pay Off High-Interest Debt
If you have a high balance on your credit card or still have a car payment, consider paying these items off quickly.Forgo Possessions and Travel
Retirees have spent a lifetime collecting possessions. But how about collecting memories for you and your family?Do Something for Yourself With Excess Funds
Have you ever wanted to start a small business or remodel your home? Maybe you’ve always wanted that large-screen TV.Look at what makes you happy and invest in yourself. Whether it be buying things, helping family or buying experiences, ensure it’s something you want to do. Enjoy the bounty of your hard work.
