|
 The concept of aggregation may sound familiar to many people as a word, but simply put, it is used to signify the bringing together of information about a specific topic. When applied to the financial situation of an individual or married couple, this concept might mean the collecting of all financial information for a specific kind of money such as an annuity. In one example, the sum total of all income earned by an individual or married couple is the aggregation of income for the individual or married couple.
This topic is important because the individual has a need to see information in the aggregate for specific purposes. For example, qualified annuities have rules that govern the withdrawal of funds once the individual reaches age 701/2. Had the individual invested in several annuities through contributions to IRAs during working years, the individual has to aggregate all like annuities when reaching age 701/2 and look up a factor in a life expectancy table provided by the IRS to determine the minimum withdrawal that must be taken in that year. Once all annuities have been aggregated and the years withdrawal amount determined, the individual can withdraw the amount from one or all of the annuities so long as the withdrawal amount is at least equal to the minimum required withdrawal amount calculated. Tip: as a practical matter, remove the required minimum amount from those annuities providing the least returns first.
The IRS wants minimum required distributions withdrawn because it wants to start receiving taxes for the amount that had been deferred during working years. The life expectancy table is an actuarial table that if followed to completion will ensure the IRS gets all of the taxes it expected to get from the deferred investment. It carries a factor which represents how much longer you are expected to live, and then when applied to your total annuity value, will ensure you withdraw all the value before you die.
Aggregation is also used by Social Security to determine the level of benefit an individual is eligible to receive. Thus, the individual must be able to total up all income sources are identified in the social security formula in order to figure out what level of social security taxation is to be assessed.
An individual or married couple might use aggregation to determine if there is sufficient income available during a specific period of time to meet expenses. Once an individual or couple is in a position where they have to manage their own income sources, it will become important to know exactly what will be coming in and when the income funds will be available for use. The total of all income can then be utilized to cover bills and other living expenses. During working years, the income aggregation usually amounted to knowing what the net wages were on a bi-weekly or monthly basis for the individual and/or married couple. When one retires, the individual or married couple will probably have to get used to managing income and expenses on a monthly basis, as this seems to be the most accepted schedule in declaring financial activity by banks, brokerages and others.
Aggregation of investment gains and losses is also an important issue for the individual and/or married couple. Investment losses can be offset against investment gains when in the same category according to the IRS on a dollar for dollar basis when determining taxable income. The IRS allows the individual or married couple to offset like investment gains with like investment losses. Additionally, up to $3,000 in regular income can be offset by investment losses in any given tax year. Knowing the total of gains and losses in the aggregate for a given tax year is an important topic in tax assessment management.
About the Author - Retirement Aggregation Tips and Information
Mr. Jersey has worked in the financial services industry for over 30 years. |
Home 
