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IRA and Legacy Planning: Planning Today Can Prevent Costly Mistakes Tomorrow

When planning your retirement, you work with many moving pieces. A beneficial component to retirement planning is implementing strategies that can help you avoid potential mistakes when dealing with individual retirement accounts, known as IRAs, and your legacy.

An IRA is an account set up at a financial institution that allows you to save for retirement with tax-free growth or on a tax-deferred basis. There are many types of IRAs: traditional IRAs, Roth IRAs and SIMPLE IRAs – some are more common than others for many reasons. A legacy is synonymous with assets, inheritance and possessions. It echoes permanence and represents a lifetime.

IRA and legacy planning mistakes can be common and may cause serious issues. This may result in assets going through probate, unintentional, but required distributions, immediate taxable distributions, or overlooked income tax deductions. Because of this, it can be imperative to plan and review your IRA and legacy with a financial professional to help you avoid any mistakes and protect your IRA and legacy.

To start, a common mistake that is important to avoid is failure to take control of your assets. People have worked hard to build their retirement assets, and we want their assets to continue to work hard for them throughout their working career and retirement years. Then, at their passing, we want their legacy to continue on for generations to come.

Another mistake to avoid is failing the rollover test. When rolling over funds into an IRA, an individual only has 60 days to reinvest the funds, including amounts withheld for tax purposes, or risk losing the tax-deferred status of the investment, essentially making it a completely taxable distribution. A direct rollover, or transfer, is much simpler and has fewer potential pitfalls.

It is also helpful not to have too many retirement accounts. Retirement accounts someone can accumulate over the years may include certificates of deposits (CDs), 401(k) accounts, IRA accounts, and brokerage accounts. In some scenarios, a person can have as many as 10 different retirement accounts with very little knowledge of any one account. A solution for someone with many retirement accounts varies depending on their specific situation. But, consolidating can help minimize confusion, allow for optimization and let the client take advantage of all their options available to them.

Finally, it is good not to overlook tax deductions during distribution of a qualified plan. Chances are you may think you are saving for your retirement, but in actuality you are saving to pay Uncle Sam. Once you start an IRA, 401(k) or any type of qualified plan, Uncle Sam becomes your partner. To put this statement into perspective, for every dollar you save in taxes, you would need to earn a $1.50 to net the same one dollar (assuming a 33 percent tax bracket). Remember, once you reach retirement, you quit earning income so the distribution savings in tax becomes even more critical than the accumulation phase for retirement.

Being aware of these IRA and legacy planning mistakes can help you strategize and prepare for the retirement you have worked for all your life! QCBN

By Ronald Stevenson and Barbara Clark Stevenson

Ronald F. Stevenson, Investment Advisor Representative & Barbara Clark Stevenson own American Financial Investments, LLC, A Registered Investment Advisory Firm. They specialize in Professional Investment and Portfolio Management, Retirement Income Planning, Social Security Maximization, Tax Free Income Design, Annuities, Personal & Corporate Tax Preparation and Planning. For more information, call 928-771-8368, 3112 Clearwater Dr., Suite B, Prescott, AZ 86305

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Investment advisory services offered through American Financial Investments, LLC a Registered Investment Advisor in the State of Arizona. Insurance products and Tax services are offered through American Financial Security, LLC.  American Financial Investments, LLC and American Financial Security, LLC are affiliated companies.







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