About Mike Larriva

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So far Mike Larriva has created 24 blog entries.

Early IRA Withdrawals

Larriva-WEBAs you approach retirement, conventional wisdom is to spend down taxable assets and delay IRA & 401k withdrawals until the Required Minimum Distributions (RMDs) begin at age 72. This can be an effective strategy. Yet, in many situations, it may be better to start early IRA withdrawals.

Counter-Intuitive Advice and Early IRA Withdrawals

When does this counter-intuitive strategy make the most sense? It’s relative to your marginal income tax-brackets over a seven- to 10-year period.

For example, a married couple both age 62 can earn up to combined income $106,150 (gross) before the $25,100 standard deduction and still be in only the 12 percent marginal federal tax bracket. If they have $800,000 in IRA/401ks, they can withdrawal some of that money and still be in a low marginal bracket.

If that couple waits until age 72, those retirement assets with 7 percent growth may double to about $1.6 million, and RMDs would start at $62,800 per year. That RMD income along with $57,000 per year for Social Security would put them in a 25 percent marginal tax bracket in the future. (See table.)

Another trap is related to future Medicare premiums (Part B), which typically begin at age 65. The more income you have in retirement, the more you will pay in Medicare premiums. If your adjusted gross income plus municipal bond interest is more than $176,000 for a married couple, then monthly Medicare can increase from about $148 monthly per person up to $505. Paying attention to the nuances in Medicare rules could save a couple up to $8,500 per year.

early IRA withdrawalsDetermining the best time for retirement distributions can be complicated. It’s smart to come up with a plan before you hand in your resignation. Your Perspective advisor will crunch the numbers and help you create the optimal strategy.

By |2021-08-16T13:12:45-07:00September 6th, 2021|Advisors, Health Care, Retirement, Taxes|

Financial Identity in Young Adults

Financial IdentityFinancial identity is critical to success for young adults. The transition from teenager to adult is when we begin to formulate and solidify our character, our beliefs, and our life goals. It’s a significant, often tumultuous, time in life. Family, friends, culture and current events all play a role in how young adults come to understand themselves. Having self-awareness of who you are — of your identity — helps young people navigate the many demands of adult life. It helps provide a sense of control and purpose.

Young Adults and Financial Identity

Understanding your financial beliefs – or financial identity – helps inform decisions for money management. It provides insight about what you need to become financially self-sufficient, an important goal in the transition to adulthood. As a parent of college-age children, this topic is especially meaningful to me. I know each of my kids must forge their own way into adulthood. And making financial decisions will be a big part of that journey.

Brad Klontz, PsyD, CFP® is an expert in behavioral finance. He and fellow researchers identified four common attitudes toward money: Worship, Avoidance, Vigilance and Status. These beliefs are often developed early in life and are frequently passed from one generation to the next. (For more detail, read Lupe Camargo’s article “Understand Your Money Script” at the link below.)

Understanding what influences your decisions can help you better plan for the inevitable twists and turns in the road. While there’s no singular handbook for “adulting,” there are many tools and resources that can help point out the best path for you.

Perhaps you’re at the beginning of your career or independent life. Maybe you know a teen or young adult at that pivotal point. Either way, your financial advisor can help you find the resources you need.




By |2021-02-12T13:15:43-07:00February 16th, 2021|Financial Planning|

Tax Benefits of Roth IRAs and Conversions

Everyone knows saving for retirement is important. Knowing the best options and how to get started isn’t always as obvious. For example, do the tax benefits of Roth IRAs mean they should be part of your retirement plan? Or are traditional retirement accounts a better fit? Here are some retirement account basics to help you understand.

There are two main retirement vehicle categories:

  • Tax-deferred accounts (traditional IRA & 401k savings) allow you to pay no income tax on the retirement savings today; later, all withdrawals (annual deferral and compound growth) will be taxed at future marginal income-tax rates.
  • Tax-free accounts (Roth IRA or Roth 401k) require you to pay taxes now on the savings, but not on any withdrawals in retirement. In 2020 you can contribute $6,000 to a Roth IRA if you have earned income, and you are below the $124,000 to $139,000 phase out range.

Does the difference really matter right now? Current income tax rates are likely the lowest they will be for a decade; and, they’re set to revert to higher rates in 2026. (See chart below.) They could go even higher in the future.

If you’re currently a single 30-year-old grossing $52,000, your tax rate is 12 percent after your  standard deduction of $12,400. In 2026, the rate for the same income will be 15 percent. But, odds are you’ll be making more. Let’s say your income is $150,000 in 20 years; you’ll be in the 28 percent income tax bracket. That’s more than double your rate today. Thus, paying taxes on the deferral now through a Roth can mean significant tax savings in the long-run.  Start investing as soon as you have earned income – say in your teens or 20s – and you’ll benefit from 40 years of compound interest. Talk to the young people in your life about the importance of early investing. Or, ask your financial planner to chat with them.

Those at or near retirement age should look at how Required Minimum Distributions (RMDs) will impact their income taxes. Starting in 2021, RMDs must begin the year you turn 72. It might make sense to take early distributions or make Roth IRA conversions to use up the remaining amounts at the lower tax rates. To watch a brief video in which Mike explains RMDs, click here.

tax benefits of Roth IRAs



By |2020-09-29T15:43:13-07:00October 5th, 2020|Retirement|

CARES Act Key Elements

CARES Act key elements

Mike Larriva highlights CARES Act key elements for individuals.

Late last month, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) written by Congress. It provides $2.2 trillion of relief in many forms for individuals, nonprofits, small businesses and large corporations. I can’t imagine you want to read the behemoth 900-page law. So, here’s a brief overview of CARES Act key elements that may apply to you.

Income tax deadline extension: The federal deadline has been delayed from April 15 to July 15. That includes money due for 2019 taxes and for 2020 first-quarter estimated payments (second-quarter estimated payments are still due June 15, 2020).

Recovery rebates: The IRS will determine rebate amounts based on 2018 or 2019 income tax returns. Individuals who made less than $75,000 in adjusted gross income (AGI) can expect $1,200 (or $2,400 for married people filing jointly); an additional $500 will also be rebated per child under 17 years of age. Rebates will be reduced by $5 for every $100 over the AGI limit. Individuals earning more than $99,000 (or $198,000 for joint filers) will not receive a rebate.

Rebates will be delivered via direct deposit if you received a refund that way in 2018 or 2019. Otherwise, checks will be issued and mailed.

Required Minimum Distribution waiver: RMDs from retirement accounts, for people older than 70.5 years, are being waived for 2020. Unfortunately, the waiver isn’t retroactive for RMDs already taken in 2020. (Learn more about RMDs in this informative video.)

IRA early-withdrawal penalty waiver: Loans and withdrawals from retirement plans for those under 59.5 years of age normally include a 10 percent penalty. That penalty will be waived (up to $100,000) for Coronavirus-related purposes. Withdrawals will still be taxable, though the taxes will be spread over three years versus just the current year. The contribution cap will also be removed for three years for the recontribution of funds withdrawn.


By |2020-04-08T15:42:29-07:00April 13th, 2020|Advisors, Current Affairs|

Retirement Savings Legislation 2020

Retirement Savings Legislation SECURE Act 2020The broadest piece of U.S. retirement legislation since the 2006 Pension Protection Act took effect January 1, 2020. The Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed by Congress and signed by President Trump in December. The most immediate impact of this new retirement savings legislation will be felt by those nearing or in retirement.

RMD Age Increase

Prior to SECURE, retirees were required to start withdrawals at age 70½ years from traditional Individual Retirement Accounts (IRAs) or employer-sponsored retirement plans like 401(k)s. For those who haven’t reached 70½ by the end of 2019, the Required Minimum Distribution (RMD) now  must begin at age 72. That means 18 more months to grow investments before taking distributions and paying taxes.

The change also provides two additional years for Roth IRA conversions without having to worry about the impact of RMDs. Unlike a traditional IRA, Roth withdrawals are tax-free as long as you meet certain requirements and there are no RMDs during your lifetime. The general goal of a Roth conversion is to move taxable money from an IRA into a Roth at lower tax rates today than you expect to pay in the future.

Estate Planning Snag

A drawback of SECURE is removal of so-called “stretch” and “pass-through” provisions for retirement accounts beneficiaries. Formerly, if an IRA or 401(k) was left to a non-spouse or trust, the beneficiary could typically stretch out the tax benefits of the account over an extended period. With the new retirement savings legislation , however, beneficiaries will have to distribute the entire inherited account within 10 years after the owner’s death (there are a few exemptions).

Accelerated distributions mean more taxable income at potentially-higher rates. Such income may also affect means-tested Medicare premiums and Medicaid benefits of low-income retirees or individuals with special needs.

We encourage you to talk with your financial planner about reviewing your retirement accounts and estate plans to ensure they still align with your goals and that you’re taking full advantage of the new opportunities.

By |2020-01-17T09:47:35-07:00February 10th, 2020|Estate Planning, Retirement, Taxes|