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auntieannie

auntieannie

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The Retirement Savings Time Bomb...and How to Defuse It

The Retirement Savings Time Bomb . . . and How to Defuse It: A Five-Step Action Plan for Protecting Your IRAs, 401(k)s, and Other RetirementPlans from Near Annihilation by the Taxman - Ed Slott Lots of detail, and an opinionated, humorous voice -- but it helped me understand (and act) on IRA's. p.135 -- consider having the spouse remain a beneficiary instead of rolling over -- this way she can recalculate the rmd based on her life expectancy, presumably making the ira last longer. applies only to spouses.p.140 -- Keeping track of multiple rmds1. make a list2. group accts by category. simple iras, company plans, etc. 3. figure rmds for each group4. take the rmdTake the rmd well before the end of the year -- Slott suggests Thanksgiving as a deadline, so you know it's complete for the year.Life insurance considerations. Don't own your own life insurance -- your beneficiaries should own it. Have them own the policy and pay the premiums from money you give to them. You do not own the life insurance when it pays off; therefore the proceeds will be excluded from your estate. Sufficient insurance money to cover the estimated estate tax will avoid having to raid the retirement fund for that purpose, keeping the retirement money working for the beneficiaries over their lifetime. Use a reputable insurance company and a live agent. don't buy second-to-die insurance, which is cheaper, but does not pay off when the original insured person dies. Things to look for:A nonspouse beneficiary's ability to move the inherited account to another financial institution via a trustee-to-trustee transfer. This is important because a nonspouse cannot roll over.Procedures for keeping track of beneficiary forms. You don't want to use a bank that has none of won't reveal what its procedures are. Your designated beneficiary's ability to stretch the IRA over her life expectancy as the IRS allows. Unbelievably, some financial institutions do not allow the stretch IRA because they are afraid of making a mistake that might incur a liability. If so, move your IRA to a more cooperative financial institution that will serve your family's long-term needs. Can your beneficiary name a beneficiary?------------------------Recommend rolling over your 401k, etc into an individual IRA immediately upon retirement -- you will have better control and will not be dependent on the HR department -- who may not be as responsive to you as a retiree. --------------------------Attach a separate form -- see attached form, instead of filling in the small boxes on the bank form to be sure that the beneficiaries are clearly spelled out. Also, fill out a beneficiary information sheet for the beneficiaries (sample in book) so they know the info. -----------------------------------Taxes & RMD's. An amended return isn't required if you miss an RMD because the past cannot be changed on this. Report the back distributions that you missed on your current tax return. Attach form 5329. Show no penalty to be paid. Attach an explanation of why you did not take the RMD, and ask for the penalty to be waived. A miscalculation is the most common mistake and the IRS would waive the 50% penalty for that reason also -- because it feels you at least made a good-faith attempt to withdraw your RMD. p.298-299----------------------Finding a financial advisor who knows ira'sEd Slott's elite ira advisor group.www.irahelp.com/