Too Much Retirement Money? 8 Ways To Share the Wealth Before You Die
Fixed incomes normally leave very little wiggle room to build savings. However, over a lifetime of earnings and sound investments, some retirees have money to spare after paying for their necessary expenses each month.
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Before you begin to distribute that wealth, you have to make sure you are on track to fund your own retirement needs, have adequate health insurance, are able to pay off your mortgage and be debt-free. You wouldn't want to squander your finances and find yourself in a dire fiscal situation.
Give It Away Now
Many seniors already have a plan in place for when they pass. However, rather than waiting until you die to give money to your beneficiaries, it may prove financially wise -- and certainly more rewarding -- to hand over inheritances while you are still living. Not only might this reduce your taxable portfolio, but it will likely make you happy to see your loved ones benefit from your generosity.
Gift a Roth IRA to Your Grandkids
Roth IRAs are a great way to teach your grandchildren about growing money and the world of investing. You pay the tax up front with Roth IRAs and they have income-eligibility restrictions, but they grow tax-free and carry no required minimum distributions (RMDs). As long as they have earned income, you can contribute to a Roth IRA in a child's or grandchild's name -- up to $6,000 or the equivalent amount to their annual taxable earnings, whichever is less, for 2022, per AARP.
Such arrangements made for minors are typically made in what are known as "custodial accounts," which the adult -- grandparent or parent -- will control until the minor reaches the age of majority in their respective state. Withdrawals made before the age of 59.5 are subject to a 10% penalty.
Invest in a 529 Plan
Investing in a child's education is one of the most wonderful things a parent or grandparent can do. 529 plans are state-run, tax-advantaged accounts that allow you to save for a child's college education. They are more than a kind financial gesture; they are a tax-savvy tool, too. Quoted in NewRetirement, Michael Gross, owner of Rising Tides Financial, said: "The money you put into this account would not be taxed whatsoever, and once it comes time for your grandchild to apply for student financial aid, this money won't be taken into account either, which could help them receive more in financial aid."
Invest in I Bonds
Due to sky-high inflation and rollercoaster stock market trends, U.S. government-backed I Bonds are a popular choice for investors right now. I Bonds are designed to protect your money from inflation (because inflation is so high this year, the I Savings Bonds interest rate rose to 9.62% in May). They can be a tricky investment for your beneficiaries, however, as they are dependent on inflation rates and carry penalties if withdrawn before a five-year threshold. However, in these inflationary times, they can provide a safe intermediate-term (and even long-term) investment for a grandchild, and they never lose value, per District Capital Management.
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Charitable Contributions
The social good and personal satisfaction gleaned from donating to a cause you believe in is worthy of consideration. If donating to charitable organizations is specified in your will, consider giving your intended gift to said organizations now so you can watch your contributions at work. But, tax-wise, there are different advantages to gifting charitable contributions during your lifetime and after your passing, so check which option will benefit your money best.
Have a Birthday Bash
Just because you're retired, that doesn't mean you have to stop commemorating each passing year. If anything, there should be more reason to celebrate! As MarketWatch suggested, investing money throughout the year and withdrawing 5% of the balance on your birthday to spend on a present to yourself will bring an exciting annual retirement opportunity. Whether it is a vacation, investment in a hobby or something entirely out-of-the-box, you are never too old to celebrate your passions.
Create Your Legacy
Investing in the future of an organization is the ultimate gift. It provides a positive impact to the donor (and the cause) and provides a meaningful influence on both long after death. Whether you contribute to an endowment or start a foundation or grant, these financial acts of kindness can be appreciated while you are living and can set a good example for future generations after your passing.
Spend It How You Wish
No matter what anyone says, your extra assets are yours -- but you can't take it with you. There are no hard and fast rules on how you should spend it, so why not simply spend your money on things you like? New experiences await.
This article originally appeared on GOBankingRates.com: Too Much Retirement Money? 8 Ways To Share the Wealth Before You Die
