Happy Last Year of the Decade

Happy New Year everyone.

There seems to be a controversy every ten years about when a new decade starts. Thankfully, I will not live to experience this debate on steroids when the next century comes around.

I’m a numbers guy and have admitted on an earlier blog to missing the old odometers that gradually rolled over to a new thousand, or ten thousand, or one hundred thousand, the nines slowly being pulled around the circle and replaced by zeros. I’ve damned near crashed a car trying too hard to catch the exact moment when a newer car with a digital odometer changed from 49999 to 50000.

And later this year I will celebrate (well, I hope I will, there are no guarantees) completing my seventh decade when I turn 70.

All these social cues lead us to believe that calendar decades also end on nines, meaning the new decade starts with a zero as the last number. The social cues are leading us astray.

My odometer and my age both started life at zero, and so, the order of ten is 0,1,2,3,4,5,6,7,8,9.

When Pope Gregory instituted the Gregorian Calendar, parent to our “Common Era” calendar, it did not start at zero, it started at 1. The Pope skipped zero! Similarly, if we are referring to years before the Common Era, we start counting at minus one! The order of years when we are dealing with the first decade of the Common Era calendar is 1,2,3,4,5,6,7,8,9,10.

Quod erat demonstradum: our current calendar decade still has one year to go before it’s over. Which doesn’t mean this year isn’t starting a new decade—it is, as does every new year, as does every new day. It’s just a matter of focusing on the future ten years starting now.

So, when someone tells you, “Welcome to the new decade,” feel free to respond in kind (and unlike me, keep to yourself that it isn’t really THE new decade).

* * * * *

James M. Jackson authors the Seamus McCree series. Full of mystery and suspense, these thrillers explore financial crimes, family relationships, and what happens when they mix. False Bottom, the sixth novel in the series—this one set in the Boston area—is now available. You can sign up for his newsletter and find more information about Jim and his books at https://jamesmjackson.com.

Grandparents are hiding out until January 1.

Why, you ask, are grandparents hiding out until January 1, 2020?

Is it because they gave their three-year-old grandson that fire truck he loves with the VERY LOUD siren and his parents are steaming mad? While that generational payback may not have been appreciated, the answer is more sinister.

It’s because Congress and President Trump put a temporary target on some older Americans that only lasts until the first clock-tick of 2020.

Only those oldsters with significant IRAs they are leaving to their children and grandchildren need worry. Congress established IRAs (Individual Retirement Accounts) in 1974 to help workers save for retirement. Lawyers did what lawyers are paid to do and found ways for wealthy individuals to use their IRAs as estate-planning devices to minimize taxes and pass on the maximum amount to heirs.

How so?

Under the old rules, if you bequeath your IRA to your grandchild, the minimum they must withdraw each year is based on life expectancies. The rules are complicated, especially with multiple beneficiaries, so I’ll gloss over the details and move right to a simplified example:

Grandma’s IRA is worth $1.0 million bucks. She leaves it to her twelve-year-old grandchild. Under 2019 rules, the kid must take out a minimum distribution the first year of $14,124. And each year thereafter the child will need to take out similar amounts (the amount depending on investment returns). For simplicity, let’s just call it $14,000 a year adjusted for inflation for life. That’s the minimum, the beneficiary can withdraw it faster if they choose.

Under the new rules, non-spousal IRAs inherited after December 31, 2019 must be distributed within 10 years. (There are a few exceptions, one of which is that the ten years doesn’t start until the child of the IRA hold becomes an adult). So, in our example, Grandma dies and our 12-year-old grandchild must take all the money out by the time she is 22! If done evenly, that means $100,000 a year (adjusted for investment returns).

Talk about an early tax bite (which is why Congress added the provision; they wanted to pay for other things they wanted).

But that’s not the only complication: How are colleges going to look at financial aid for a kid with an inherited IRA that they must draw down? Worse, if Grandma structured it so the kid could only take the minimum distribution until they were (say) age 35 (when Grandma hoped the child would be mature enough to have access to all the money) it’s a financial disaster. There is no minimum distribution until the end of ten years and the child must take it all! Uncle Sam is rubbing his fingers in delight because the highest tax rates will apply to most of that $1 million.

But, if Grandma just happened to die before the end of 2019. These problems go away.

So wary grandparents and parents across the land are booking last minute trips to destinations kept secret from the family. Or they’re holing up in that bunker they built in the 1950s to save the family from nuclear attack. Or the new one constructed for the Zombie Wars.

Rather than considering ways to bump off Grandma, it might be prudent to check the estate plan and get those high-priced lawyers working on the next best way to avoid taxes.

Here’s wishing you and yours a terrific 2020.