Your IRA May Have a Co-Owner

Do you think you own your IRA all by yourself? Unfortunately, you have a co-owner. I will spend only one minute talking about this. Read on. 

Oh, before I forget – I’m talking about accounts where you are either taxed currently or will be down the road. This includes Taxable Accounts (Individual and Joint Tenants) as well as Tax-Deferred (IRAs, 401ks, 401as, etc). 

Your co-owner is Uncle Sam. He has a stake in your account because he is going to get paid on it. 

Let’s focus on IRAs for now instead of Taxable Accounts. 

In the case of IRAs, Uncle Sam is waiting until your golden years in your 70s when he will be standing there with arm outstretched and hand open, waiting for the tax payment from your Required Minimum Distribution (RMD). 

You can’t avoid him with those RMDs. Well, you can, but you will pay a penalty if you don’t take your RMDs. 

Getting rid of your IRA co-owner isn’t easy and can’t always be achieved. However, if there are opportunities to build up “never-to-be-taxed-again” investment accounts, you may want to take a look. This could be a Roth IRA or a Health Savings Account. 

I will talk more next week on Tax Bracketology, which can provide some strategies to return your retirement funds to sole ownership. The short version is to pay your taxes now if they are at their lowest and send your co-owner on his way.