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Eric Zizich:
It’s now time for 4 Your Money. We’re joined by James Nelson, financial advisor of NelsonCorp Wealth management. James, great to have you.
James Nelson:
Thanks. Glad to be here.
Eric Zizich:
Absolutely. And we talked about a lot of different financial planning topics on the show. They’re all important, but some aren’t as easy to talk about as others. Isn’t that right?
James Nelson:
Yeah, that’s right. Death is not something most people want to talk about, but it is a important topic. And it’s important because we need to plan for what happens if there’s a premature death of one or both spouses. It’s especially important for the surviving spouse. You know, how were they left, what condition are they left in financially. And most people don’t want to have that conversation. It’s also important to keep in mind that we don’t want that emotional spouse to have to make a lot of financial decisions, tough decisions at that period of time. It’s nice to have the conversation ahead of time. Do that planning beforehand. Makes things a lot more easier going forward.
Eric Zizich:
Definitely. Are there specific topics that you think would be worth talking about?
James Nelson:
Yeah. For married couples, it comes back to the tax situation. That’s probably the biggest one. I think we have a graph coming up here in just a second. But the biggest thing is for married couples, switching to a single filing status. As a married couple, you can make almost $80,000 and stay in the lowest income bracket, which is a 12% bracket. That’s cut in half when you’re a single taxpayer. It goes to $40,000 in income and you’re in the 12% bracket. The standard deduction is another big item, that’s cut in half. The standard deduction for married couples, $24,000. That’s cut to $12,000, so that’s a huge deal. The RMD decisions, that’s if somebody has an IRA or a 401k in let’s say the decedent’s spouse name.
James Nelson:
Do we roll that over to the remaining spouse, or do we leave that in the Cedent’s name? There’s a lot of variables, not always the easiest decision. Especially if there’s a discrepancy in age, you want to talk to somebody before you make that decision. And then the Medicare brackets, that’s a big item that nobody talks about. Medicare has five tiers, and that’s based on your taxable income. Your taxes are going to go up when you’re a single tax payer, but also your Medicare premiums are going to go up. And that’s pretty tough if you haven’t planned for it.
Eric Zizich:
That’s really interesting because I would assume that me and my wife should file jointly because we’re married. But to know those kinds of nuances is great. And for viewers, what are some specific strategies moving forward?
James Nelson:
Yep. For the surviving spouse, I think the biggest thing is planning, making good decisions when it comes to social security. And then also if you’re in those lower tier brackets, really look at doing some Roth conversions while both people are around. It really allows that surviving spouse to have some options with a tax free bucket of money in the Roth IRA.
Eric Zizich:
Great advice for tax time, James. Thanks for joining us.
James Nelson:
Yeah. Thank you.
Eric Zizich:
And if you miss any of our conversation, we’ll have it up on our website. You can visit OurQuadCities.com.
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