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Create Your IRA Exit Plan

10-06-2016

IRAs, 401(k)s, 403(b)s and other qualified accounts are popular tools for building a retirement nest egg. But after investing and saving with one of these plans for the last 30 years, as retirement nears you may ask yourself, "What should I do with my retirement account?"

The most common advice given is to withdraw as little out of your IRA as possible while taking your Required Minimum Distributions (RMDs). MarketWatch, in its recent article, “IRAs are for retirement planning, not for retirement,” suggests that we should think a bit outside the box before simply following the masses, with regards to your IRA and its RMDs.

If your money manager is advising you to let your IRA sit and only withdraw the RMDs, remember that typically, money managers are making 1-2% in fees on the total amount of money under their management. As such, the money manager has a vested interest in you keeping most of your money under his or her care.

Here are few ideas:

If tax rates increase, qualified accounts don’t give you any protection from future tax liability. If you’re like most Americans who think that taxes will increase in the next decade, do you want to wait for your retirement savings to be taxed at a higher rate? If you're between the ages of 59 and 70½, you are at the perfect spot to start an IRA Exit Plan.

Another consideration is the way in which you’ve titled your IRA and the beneficiary designations. Talk with a qualified estate planning attorney when designating your primary, contingent, and tertiary beneficiaries, as well as when titling an IRA.

Remember that when you set up a trust, your IRA cannot be retitled to your trust. This inability to change ownership of your IRA can lead to gaps in planning for Medicaid and Veteran Benefits. The quick solution is to overcome this by simply changing the IRA's beneficiary to their trust. But beware—there can be dire consequences if your beneficiaries of your IRA are not done properly.

Talk with an estate planning attorney to be certain that the IRA's beneficiary is a trust that qualifies as "See Through Trust,” or else it can cost your families thousands of dollars in taxes by making it instantly taxable upon your death.

There’s no better time to start preparing yourself, as well as your investments, for retirement. Create your IRA Exit plan so that when you enter retirement your assets will be as ready for retirement as you are.

Reference: MarketWatch (August 17, 2016) “IRAs are for retirement planning, not for retirement”