Check-Up for
Individual Retirement Accounts (IRA's)

Your retirement plan savings (that is, qualified plans and IRAs) are important to your financial well-being for several reasons. Right now, they are one of the last places you can accumulate income without currently paying tax. The power of compounding pretax dollars makes a retirement plan one of the most powerful financial tools you have. Think of it as an interest-free loan from the government.

When you reach retirement, the assets in your plan may be a significant portion of your savings. Therefore, its important that you seek competent tax advise to protect and preserve the substantial tax advantages available for yourself and future generations.

Generally, when you begin to withdraw from your retirement plans, you will be subject to tax on the distributions. (If you made after-tax contributions to your plan or IRA, a portion of each distribution will be tax free. Also, special rules apply to Roth IRAs.) If your distributions begin prematurely (before age 59 1/2), you may be hit with the penalty.

Also, the interest-free loan does not go on forever. When you reach age 70 1/2 (or in some cases, retire), you must start withdrawing a minimum amount from your traditional IRAs each year. Distributions from Roth IRAs are not required during your lifetime.

When you die, the beneficiary designation in effect at the date of death will determine not only who gets the retirement plan assets but also how quickly your account must be paid out to your beneficiary (and therefore, how quickly the benefits of tax deferral are lost).

Your retirement savings may be critical for you and your dependents’ future well-being. With tax planning now, you may be able to avoid penalty taxes when you take distributions. You may also choose a beneficiary that will maximize post-mortem planning opportunities and minimize the amount your heirs are required to withdraw after your death.

I would like to visit with you for a “check-up” of your retirement plan for potential mistakes that cold have costly unintended tax consequences. Call soon to discuss what you can do now to protect your retirement plan’s full tax attributes.