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Author: billybeau Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75540  
Subject: How To Invest Parents Money Date: 9/7/1999 11:29 AM
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Greetings:
My parents each have a traditional IRA (60-70K in each account) invested in Mutual Funds. They are at the age where they have to withdraw so much each year. This amount that is withdrawn is deposited into a brokerage account which is also in Mutual Funds. I would like to put some of this money into the RP4. They can live comfortably on their retirement so they may not even have to use the IRA's or the savings account. Should I transfer the money from the IRA's to start the RP4 or use some of the savings account? I also opened a Vanguard Index 500 fund last year with 10K which they deposit $500 a month. Should they continue with this or deposit that $500 into the "sweeping account" until ready to invest with the RP4? Also should they deposit the amount withdrawn from the traditional IRA's into the "sweeping account" for the RP4 investment? Thanks so much!
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13773 of 75540
Subject: Re: How To Invest Parents Money Date: 9/7/1999 12:04 PM
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Greetings, Billybeau, and welcome. You wrote:

<<My parents each have a traditional IRA (60-70K in each account) invested in Mutual Funds. They are at the age where they have to withdraw so much each year. This amount that is withdrawn is deposited into a brokerage account which is also in Mutual Funds. I would like to put some of this money into the RP4. They can live comfortably on their retirement so they may not even have to use the IRA's or the savings account. Should I transfer the money from the IRA's to start the RP4 or use some of the savings account? I also opened a Vanguard Index 500 fund last year with 10K which they deposit $500 a month. Should they continue with this or deposit that $500 into the "sweeping account" until ready to invest with the RP4? Also should they deposit the amount withdrawn from the traditional IRA's into the "sweeping account" for the RP4 investment? Thanks so much!>>

If they don't really need the income, then I would take the money from the IRA. Yes, it gets taxed, but it must come out anyway, and the ultimate taxes to the heirs could well be far less. Assets outside the IRA will be inherited at market value, and that market value becomes the basis for heirs in determining any gain subject to taxes on their ultimate sale. The IRA will be taxable to the heirs at ordinary rates on receipt. Given a choice, I would rather my heirs escape that taxation.

Regards..Pixy

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13775 of 75540
Subject: Re: How To Invest Parents Money Date: 9/7/1999 12:06 PM
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Greetings, Billybeau, and welcome. You wrote:

<<My parents each have a traditional IRA (60-70K in each account) invested in Mutual Funds. They are at the age where they have to withdraw so much each year. This amount that is withdrawn is deposited into a brokerage account which is also in Mutual Funds. I would like to put some of this money into the RP4. They can live comfortably on their retirement so they may not even have to use the IRA's or the savings account. Should I transfer the money from the IRA's to start the RP4 or use some of the savings account? I also opened a Vanguard Index 500 fund last year with 10K which they deposit $500 a month. Should they continue with this or deposit that $500 into the "sweeping account" until ready to invest with the RP4? Also should they deposit the amount withdrawn from the traditional IRA's into the "sweeping account" for the RP4 investment? Thanks so much!>>

If they don't really need the income, then I would take the money from the IRA. Yes, it gets taxed, but it must come out anyway, and the ultimate taxes to the heirs could well be far less. Assets outside the IRA will be inherited at market value, and that market value becomes the basis for heirs in determining any gain subject to taxes on their ultimate sale. The IRA will be taxable to the heirs at ordinary rates on receipt. Given a choice, I would rather my heirs escape that taxation.

Regards..Pixy

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Author: Dylander One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13802 of 75540
Subject: Re: How To Invest Parents Money Date: 9/8/1999 3:28 PM
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You might consider rolling the whole IRA over into a Roth IRA. There would still be the taxes to pay (like if you took it all out all at once) but after that they won't have to worry about withdrawing it unless they really need it. As folks get older, unexpected medical expenses can become an exponentially rising expense and having a Roth IRA earning interest tax free may be just the ticket they need. Hope this helps.

My $0.02 worth
Dylander


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Author: pcoppock Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13806 of 75540
Subject: Re: How To Invest Parents Money Date: 9/9/1999 7:37 AM
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Along the same thread, my parents came into a large sum of money. They are well off now and want me to tell them the best way to invest it for estate purposes. They are setting up a living trust for the estate, but now they are asking about Annuities and Variable Annuities.

Other than telling them so send me the money, :) What's the "best" way to grow the value?

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13815 of 75540
Subject: Re: How To Invest Parents Money Date: 9/9/1999 1:16 PM
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Greetings, Pcoppock, and welcome. You asked:

<<Along the same thread, my parents came into a large sum of money. They are well off now and want me to tell them the best way to invest it for estate purposes. They are setting up a living trust for the estate, but now they are asking about Annuities and Variable Annuities.

Other than telling them so send me the money, :) What's the "best" way to grow the value? >>


For the Foolish take on annuities, see my musings in post 11725 on this board at http://boards.fool.com/registered/Message.asp?id=1040013002967001&sort=postdate. For estate planning purposes, they are definitely not the product of choice. If your folks are interested in growing this cash to pass on to their heirs with the least amount of taxation, then IMHO a sound long-term buy and hold strategy for stocks will fill the bill nicely. It will have minimal income tax ramifications to them. While the value of such a portfolio will be counted as part of their estate at death (and hence subject to estate taxation), their heirs will receive those assets at market value. The shares could be sold immediately with no income tax impact to those heirs. If sold at a later date, gain or loss would be based on the market value at the time the heirs received those shares. For more information on some long-term strategies your folks could use, check out our portfolio area at http://www.fool.com/portfolios.htm.

Regards..Pixy

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Author: BGPenhollo Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13842 of 75540
Subject: Re: How To Invest Parents Money Date: 9/10/1999 6:17 PM
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"You might consider rolling the whole IRA over into a Roth IRA. There would still be the taxes to pay (like if you took it all out all at once) but after that they won't have to worry about withdrawing it unless they really need it. "

Is this ability to roll an IRA to a ROTH available if mandatory distributions have begun?

Also for folks over 70 1/2 that roll an IRA into a Roth are there any limitation on how much or when they can withdraw funds?

I understand how a Roth would work for me with the five year limits but I am unsure how it would work for my mom who is past the age of 70 1/2.

BGP

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13844 of 75540
Subject: Re: How To Invest Parents Money Date: 9/10/1999 6:42 PM
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BGP asks:

<<Is this ability to roll an IRA to a ROTH available if mandatory distributions have begun? >>

Yes, it is with one restriction beyond the $100K AGI limit. The minimum required distribution must be taken for the year before the entire IRA may be converted to a Roth IRA.

<<Also for folks over 70 1/2 that roll an IRA into a Roth are there any limitation on how much or when they can withdraw funds?>>

After the money is in a Roth IRA no further distributions are required. Thus, the owner may take as much or as little as she wants. If she wants to let it grow and take nothing, she can do that.

Regards..Pixy

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Author: StevePoirier Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13846 of 75540
Subject: Re: How To Invest Parents Money Date: 9/10/1999 7:24 PM
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I just completed for my mom what your doing now. First I would speak with a professional planner since they will have an opportunity to explore your parents monthly needs. My mother is invested in "safer" funds through the Best of America series with Trans America. Should be getting her about 8- 10% annually. She will be able to withdraw at a nice rate and her money should technically "outlive" her. I would also reccommend that you explore Long Term Care insurance. I have found that care at nursing homes as well as home care can cost upwards of $4000 per month. That can easily wipe out a lifetime of savings. Hope this helps a little. Good luck


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