64 • RUBY, WILDING & SWANSBURG account, and the IRS wants to collect its tax money. It requires you to withdr aw (and pay taxes on) a set minimu m amount each year, which is calculat ed as a percent of your account val ue b ased on your l ife expecta ncy. (If you don’t withdraw your RM D, you will b e subject t o a penalt y tax of up to half of your missed RMD—the IRS is serious abo ut ge tti ng i ts s hare.) • My IR A funds will be taxed when I reinvest the m in a taxable account. I’ll show you the same example with these funds spent as income next, but, for now, remember I’ m taking the funds and putting the m in a taxable account. • My IR A value will be taxed whe n I die, and the remaining funds are passed to my heirs. Remember, unlike estate taxes, income taxes are due when funds are withdrawn fro m a qualified acco unt. So , if yo u leave your spouse or childre n your remaining IR A value, they will have to pay income tax when accessing those funds. This can be a big concern for savers. After all, when I pass away, there are two likely outcomes for my remaining IR A funds. First, my wife continues us ing the account. N ow she’s paying taxes on the same amount of income at a higher, single-fil er tax rate. Man y expert s call t his t he “widow’ s penalty” because the survivi ng spouse sees his or her tax es rise ba sed on t he chang e in tax fili ng status . The second outcome is my children inherit my IRA. Assuming I live a long life, my children would inherit my IR A at the height of their earning
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