This is the Truth Network. Um Welcome to Finishing Well, brought to you by CardinalGuide.com with certified financial planner Hans Scheil, best-selling author and financial planner, helping families finish well for over 40 years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes.
Now, let's get started with Finishing Well. Welcome to Finishing Well with Certified Financial Planner Han Scheil and today The show is IRA 401k mistakes that can't be fixed. They're irreversible. And so, You know, clearly we don't want you to make these mistakes. And so I love this show.
I think it's gonna be really helpful for me. It was all new information I was not aware of as far as 401k and IRA mistakes. or rules that I wasn't aware of, and so I think this could be helpful. I think all of people should be aware of this, even if you don't have an IRA, like I never had one for years. Believe me, you may inherit one and then you're going to need this information desperately.
So, definitely worth listening to. But when I think about the idea of an irreversible mistake that has to do with. you know essentially your estate you can't help but think of Poor um Esau, Jacob, and Isaac in their um story in Genesis that there was mistakes made that were irreversible. You know, first thing. Esau got in a hurry.
He didn't seek counsel. He didn't have a Hans in his life to go and say, you know, I'm hungry. What do I do about this?
Well, whatever you do, don't sell your birthright for some soup.
Okay. I mean, that was, once it was done, it was done. Even worse, right, was Uh when Isaac didn't seek the counsel you should have didn't listen to his wife And and and gave his birthright blessing Um to Jacob. And here comes Esau into the picture. And, you know, what did he say?
This isn't fair. You know, and Isaac, you know, what can he say? I'm sorry, son. What's done is done. I can't undo it.
It's not reversible. The rules are the rules. I've given it, it's gone. You know? And so there are things in life, it may not be fair, but it is irreversible.
Again, to seek counsel that comes out of this thing. And and and And God sets them up. You know, so that we could pay attention that, you know, it's there's a time to be humble and admit I don't know what I'm doing. And to me, when it comes to moving IRA money, I think after listening to the video on the subject, Hans, I need help. But we start off with the first one.
You know, and it's titled a non spouse beneficiary rollover.
Okay. I mean that so let's break that down.
So you are the beneficiary. You're not a spouse. Yeah. This has come from your mother or father or sister or brother, somebody other than your. living spouse.
You're the beneficiary. And now you're trying to get this money under your name, which is the normal thing for a beneficiary to do. And when it has the word rollover. The presumption is that if you had any kind of counsel at all, You know that if you take the money, Out of the IRA that was your father's IRA, you were the beneficiary. He died, your father did.
and they send you a check. But the amount in there It's out of the IRA. That's what's not reversible. Is if you take possession of the money. as a beneficiary that's not a spouse.
That money's out of the IRA never to be put back in. Good try. Yeah. When we add the word rollover, so a lot of folks are thinking, well, I'm just going to take it from where it is. and I'm going to roll it over to another IRA.
Okay. And there's a Several ways to mess that up too. But when you roll it over, if you take possession of the money. In any way, there ain't no rolling it over. It's okay.
Or If you roll it over into your own IRA, so it was in your dad's IRA, he died. You're the beneficiary. Your name. The custodian sends you a check after you claim it. And then you say, okay, or maybe they don't send you a check.
They just are going to roll it over per your instructions into your own IRA.
So you're doing a custodian to custodian transfer. The IRS doesn't look at it that way. The IRS says you've just pulled the money out of. The beneficiary IRA, you've touched it because even though it's in your IRA, it would. You know, the bottom line here is this cannot be fixed.
Right. Yeah, and that to me is. Amazing information because I can tell you that. you know how many people find out oh wow i'm the beneficiary of this $300,000 or whatever my dad or mom had in this IRA. And the immediate thing that you're going to do is like, okay, I need to.
Good. To get it, right? I'm going to fill out this form. You don't necessarily seek counsel, and then you don't realize that, oh my goodness. There were so many better tax options available to you if you had sought counsel.
and and found a way to to create what you guys called in Is it a beneficiary IRA or an inherited IRA? It's an inherited IRA. but it could be called a beneficiary hired, and both those that you said were correct. But I've had plenty of people show up with me. And they already knew about the 10-year rule.
Because once you Once you set up this properly set up this IRA rollover to a beneficiary IRA or an inherited IRA, then you have 10 years. to withdraw it down to zero and pay the taxes.
So they maybe know about the ten-year rule, they just didn't read the whole book. They only read the second chapter.
Okay. Yeah. They'll come to me, they've already taken possession of the money, or they've already rolled it over into their own IRA. The custodian just accepted it. of their IRA And the people that are going to send it just going to send it to whoever you sent it to.
And now they say, I want to do it, they come into me and I want to do the 10-year rule. I want to, so maybe they are seeking counsel, it's too late. I can help you deal with the taxes.
So you just took possession of $300,000. And so we're going to take your tax return for 2026. If that would have already been 80,000, And then we're going to add $300,000 to that. Your income for. 2026 is 380,000.
Okay. And your taxes on a $380,000 income are up there. And you're going to have to take that money. out of the money you just the 300 000 you just got you're going to have to take probably a hundred thousand of it maybe 120,000 of them just send it to the government. We'll send it to the state and the Fed.
And then you're going to be left with like 180, and that 180 that's left. is not going to be in a IRA. It's just money, and now you can put it in the bank, you can invest it. But it's not in an IRA. It doesn't have all the text.
benefits of an IRA. That's pretty penal. Right, as opposed to if if you'd done it right Then you you could have distributed what, $28,000, $25, $6,000, $7,000. and and had an income of 112 or whatever. In the 10-year rule, and not even pay close to the amount of taxes.
Or set yourself up for Irma if you're fixing to go on Medicare or other issues that have to do with raising your income like that in a year.
Well, let's talk about how to do it right.
Okay, non-spouse beneficiary. You just inherited. That you're the sole beneficiary. And so now you're in touch with Your dad's IRA. And it's at a bank or it's a stock brokerage or somewhere, and it's there, they're the custodian.
Yeah. They've been notified that he died. And so They gotta do something with this. They're just going to let it sit there until something comes properly, and if you send in. a beneficiary claim form.
What you're really doing is you're saying send me a check. Good thing.
Now Let's talk about how to do it right. is you could take Right at the same custodian. Like let's say it's fidelity.
Okay, so you could go to Fidelity and you could say, okay, what I'd like to do. is an inherited IRA. And we got to title it It's got to have your dad's name in the title. The inherited IRA Um John Q. Smith.
Deceased, or something. There's, you know, I don't have a book in front of me, but there's an exact way to put it. But as long as you have those elements, of who it came from. and that he's dead. Essentially, and you know, and that kind of thing.
So now it's an inherited IRA. And Fidelity could just move it. to that new thing right at Fidel.
Sometimes Fidelity could just retitle The same account. I mean, some of these custodians make it easy. They could just turn that account. into an inherited IRA. just by retitling it.
And now it is officially an inherited IRA.
Okay, and a lot of times We don't want people to do that. By the time they come to me, the way you're going to pay me for my services. is I'm going to earn a commission. or charge you fees And I'm going to set up an account. And Charles Schwab.
or you're going to put it into an annuity or something. That that's how you're going to pay me for one thing. And you're going to have me doing it, or Tom, or somebody, one of our other advisors here.
So we have a. You know, we have an interest. Yeah. getting you to move it and roll it over.
Now we're fiduciaries.
So if it would be better for you to leave it where it is, we're going to tell you that.
Okay. Most of the time it's not because the people at Fidelity if if i'm just using them as an example A lot of times They don't educate beneficiaries. They don't tell them what to do. They just don't view that as their job.
So like leaving it there. And sometimes you maybe didn't like your dad's stockbroker. Maybe your dad didn't even like them. you know, or your mom didn't or whatever.
So You know, there's all kinds of reasons to get it away from there, but if you're going to get it away from there, You need to do it properly. There you go.
Well, this would be a good point to remind you that our show is brought to you by Cardinal Guide, cardinalguide.com. And if you go to cardinalguy.com, you're going to see the seven worries tabs and Of course, this one is about IRAs and a very necessary one for all of us to get these three mistakes that you don't want to make, that can't be undone with your IRA. And you can find some of this information also in Hans' book, The Complete Cardinal Guide, The Planning for and Living in Retirement, the workbook that goes with that. And of course, to make it easy, if you're in these situations that we're going to be talking about, by all means. The contact Toms or Tom page, it's all there at cardinalguide.com.
So we come back. I'm going to be talking a lot more about IRAs and 401ks, the mistakes that can't be fixed. We'll be right back. Investment advisory services offered through Brookstone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other.
Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Welcome back to Finishing Well with Certified Financial Planner Hans Scheil and today show IRA and 401k mistakes that can't be Fixed. And so we finished number one pretty much, Hans. Number two is very much related to that one, right?
It is.
Now we're talking about the spousal role.
So now your spouse has passed away. We deal with these all the time. Um yeah, so well Because you can't put IRA money in both names. And a lot of people don't really they don't think about it, but when we find IRAs, they're never in both names. Yeah.
Your IRA money where you're living. needs to be you know so robbie has his ira In his name. Tammy has her IRA and her name. And you're supposed to be the beneficiary of hers, and she's of yours. I mean, and that's the way it is in most cases.
So now Now what's happened is your spouse has died. Yeah. Okay. You're now the survivor. And what I'm going to tell you is you got options.
Right. I mean you got you got a lot more options. Then the non-spouse Beneficiary that we talked about in the beginning.
So the law of IRAs. is very favorable. toward spouses.
Okay. Um And so one of the first decisions you're going to need to make is Do I want to leave it? You know, so say you passed away and Tammy, so now I have this IRA. Does Tammy want to leave the IRA in Robbie's name? Have it be an inherited IRA.
for the benefit of Tampa.
Okay, and now she's got rules for distributions. But there could be reasons to do that, to leave it in Robbie's name, but that's one option. The other option is she can roll it over into her own IRA.
Okay, so So That's I mean, she could she could just roll it out of there because she's the spouse beneficiary. You can't do that as the non-spouse beneficiary.
So she could roll it over into her own IRA and mix it up. Or she could open a new IRA in her name to roll it over into that if she wanted to keep the money separate. You've got a lot more options as a spouse. Hmm. And you can Yeah, so so so and so why do they allow this?
Is that Obviously, the thing is set up so the spouse is going to have to live off the money. I mean, they're going to have a big. the whole tax law and IRAs and everything are set up. The government's gonna look upon a spouse as in need. They're going to look upon children, adult children, as inheriting.
So now they're people that are getting extra money. And they want a taxi fast.
So, when we talk about what can't be fixed, I'm going to tell you how people mess this one up. Is they just take the money. You know, they say I'm the beneficiary, so that. you know the place Just send him a check.
Okay, and now You know, now. There's a way we could possibly do a 60-day rollover on this because, but let's leave that out of the equation. It's the same thing: when the money leaves the IRA, improperly That's what the title of the whole show is. You can't then do something with it, or you can't put it back where it was.
So that's where we say mistakes that can't be fixed. I have people come into me all the time where they've already made the mistake, and that's what we're. listing. And so we're trying to prevent that. And it goes down to don't do this part of financial planning at home.
Don't do your own plumbing. Call a plumber.
Okay, or you're going to end up with your head under the sink getting flubbed. You didn't know your whole kitchen flooded. And it really is that true with IRA.
So let's talk about a spousal. Wha why would like if you died, why would Tammy want to leave it? in your IRA. Um And because of the difference in your two ages, She probably wouldn't. What she'd really want to do is roll it over into her own IRA.
Because her minimum distributions are going to start about eight or nine years later. that years would have started.
Okay. Because she's younger.
So a lot of spouses, if they're younger, and they inherit, remove the IRA into their name. to further postpone minimum distributions. Um Since we're on that subject and we're talking about Tammy. In the case where my IRA Is Um Roth. Is it still better for her to roll that into hers because there is no minimum distribution on a Roth IRA.
Or Is it a little bit Um And I guess if yours is five years old or older. And even if it wasn't, she can dig.
So now just suffice it to say it wouldn't matter as much. But I want to show you the converse. Let's say you were 64. And she was fifty-five.
Okay. And you passed away.
Now She may want to leave it in your name. Then it was traditional IRA untaxed. and she wants to make distributions. Because she needs to, because she needs some money to live. Right now If she rolls it into her name.
She's 54. She's five and a half years short of 59 and a half She's going to have to pay a penalty. Right. Makes withdrawal.
So if she leaves it in your name, Great. As an inherited IRA, she can make withdrawals without any penalty. She'll just have to pay the tax.
Well, that actually applies to us right now. Because you know, I had a Roth IRA, and if I died in this car accident, I was just involved in. She would need to leave it. Right? Because she isn't 65.
Right, it's not $65, it's $59.5, though. Still You can see why, I mean, we're having a conversation. You should hear some of the conversations with beneficiaries, and they're all like, just like, you know, Esau said, well, that's not fair.
Well, it may not be fair, but it's the way it works. You already took the money out of this IRA. It looks like it.
Now we're going to figure out what to do with the money and how to pay the tax, but there ain't no fixing this.
Okay?
So you want to come see me before you touch the money. That's what it really boils down to. or somebody else, you want to get wise counsel. before you take any actions with it. And we want to look at this from all ways when you need the money, what your age, your deceased spouse.
Who you're going to leave it to, how old you're going to be. We just look at all that, and we'll come up with the right solution.
So the real. Topic here is what can't be fixed. And let's kind of squeeze in the third one here before we run out of time. It's exceeding the one rollover per year. Have you ever heard of that before, the once a year rollover?
I hadn't heard the 60-day rollover, the once-year, I hadn't heard of none of that.
So but again, huh? There's a lot of amateurs that have. And there's a lot of amateurs. But have used it because You know, you got somebody sitting there, they got $500,000 in their IRA. Um And they they they they want to get some of it.
for a little let's say they're buying a house or something. and they they want to get 200,000 of it.
Okay, and so what they do is they do a 60-day rollover, which means they take possession. of the 200,000. And now it's theirs to use. for the whole 60 days, but they have exactly 60 days to get that rolled over into a new IRA.
Okay, so essentially you could if if if this is not a very smart thing to do but a lot of people go do it, is you can pull money out. Use it. But you better have it replaced within 60 days because you got to get it into another IRA. within sixty days. If if the sixty days gets passed, that whole money you pulled out is taxable.
Okay, so it's a take-possession rollover thing. Like I'm going to take the money, now I've got 60 days to get it into a new account, but I'm going to use it during the 60 days. Mary didn't want to. This has been around for a long time and people used to use this. Quite often, as they'd be moving money and they'd put it back and they take it out.
I don't know all the economics. But about, I don't know, 10 years ago, they said no more. They passed a law that said you can only do this once in a 12-month period.
Okay, you could do one 60-day rollover. Take possession of your IRA money and then put it back or put it into one time in a 60-day period. one time in a 12-month period. You can hold it for 60 days. And so there's a lot of people who don't know that.
So if you do the second one, That money is now out of the IRA. There ain't no putting it back.
Okay. That's That's the rule. And so I could talk for days about this, about the mistakes. Yeah. There's very little we can do in certain situations if the money's already come out of the IRA and that's happened improperly.
Um Some of them we can fix.
So duh duh duh don't hesitate to call us up. I mean, we can at least give you advice on this. Or possibly then What are we going to do with the rest of the money now that you got after you get done paying the tax?
So by all means give us a call. I'm just trying to point out to people is you handle IRA money with care. and the titling of it in the hand. Yeah, that's it. It's clear that when you go moving it is when you can You know, find yourself in a bind.
The example that Tom used was that these people. Um Wanted to Buy another house, pay cash for it, and then sell their other house and replace the IRA money within those 60 days. And you know, that was a really, really short window, found themselves in a heck of a bind. Um you know because if you don't get that money back in in that 60-day period of time now all of a sudden you know you're showing a three hundred thousand dollar again you know we talked about that In the first show, once you show them that you have possession of that money, you exceed the 60 days, Kaching, you're paying the taxes on it. And it doesn't matter whether it's fair, you don't like it or whatever else.
I mean, the cat's out of the bag and you can't put it back in. The sad thing about those people. They could have just gotten a loan. From the bank and then paid it off. Three months later.
But you know, the problem with that, the whole thing is some people get this: I got to pay off my house, I can't get a loan, I got to pay off my house. But then they get they go buy another house they want that one paid off in the beginning. It's just And and they're so loyal to that value of no mortgage. Yeah. That they end up doing something stupid with their IRA.
Again, I hate we're out of time, but we. uh want to remind you that But if you go to cardinalguy.com, cardinal Guy.com is the host of this show that they gave you these seven worry tabs for a reason. And this IRA tab is a really critical one for a lot of folks who have a lot of money. That they've worked very hard to save. And we want to help you be good stewards of that by going to cardinalguide.com and again, watch these videos, they have lots of them.
But this mistake video, again, goes through these examples in beautiful detail, gives you show notes. and a board to look at so you can see what he's talking about. As well as, of course, Hans's book, The Complete Cardinal Guide to Planning for and Living in Retirement, a workbook that goes along with that, all in an opportunity to help you finish well. That's the goal. And again, from my standpoint, if you go to cardinalguy.com, there's the contact Hans.
And Tom Page. And and and you know Nothing like having a discussion that somebody that really cares knows what what they're talking about. And help you walk through some of these things. Because I had a boss one tell me, time tell me this, I've never forgotten. He said, you know, Robbie, if you think education is expensive, try ignorance.
And let me tell you, these could be really expensive. I mean, ask Esau. And so great hunt, great show hunts, thanks. Thank you, and God bless you. The opinions expressed by Hans Scheil and guests on this show are their own and do not reflect the opinions of this radio station.
All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such. Any statements or opinions are subject to change without notice. Investments involve risk and, unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone.
Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you. Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation. Finishing Well is designed to provide accurate and authoritative information with regard to the subject covered. Investment advisory services offered through Brookstrone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other.
Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. We hope you enjoyed Finishing Well, brought to you by CardinalGuide.com. Visit CardinalGuide.com for free downloads of this show or previous shows on topics such as Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes, as well as Han's best-selling book, The Complete Cardinal Guide to Planning for and Living in Retirement and the Workbook. Once again, for dozens of free resources, past shows, or to get Han's book, go to CardinalGuide.com.
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