by Richard F. O'Boyle, Jr., LUTCF, MBA
"The Insider's Guide to Retirement and Insurance Planning"
http://www.retirementandinsurance.com
Thank God Ed Slott, author of "Time of retirement savings pump ... and how to turn it off," he has a good sense of humor, because while looking harmless, her message is nothing short of apocalyptic. His plan heavily guarded retirement is at risk of something worse than inflation or turns of the market - burdensome taxes that you and your loved ones will have to pay once you start living on savings or try to pass them on to their heirs .
Ed Slott, a tax expert recognized nationally, give us a call surprising attention - sloppy planning, you can not just miss out on potential tax benefits, but punishing ourselves (and heirs) with tax bills excessive. There are literally hundreds of "gaps" and planning techniques mentioned in the book. It is an exceptional volume of reference for the professional planner and retirees alike. Not enough to be dangerous for the person who thinks he can make a warning information "do it themselves." Fiscal rules change frequently, so do not try these techniques without the close cooperation of its advisory and tax planner.
Throughout the book, Mr. Slott exposes us to the bewildering maze tax that applies to retirement plans. It's easy to feel overwhelmed, but I advise the reader not to be alarmed, because many of the worst pitfalls are easily avoided. Second, some of the complex strategies may not apply to your personal case. However, it is helpful to open your eyes to some of these issues, just in case.
This book is like the manual of your DVD player. Probably not going to read it from start to finish, but you should definitely have it handy when:
- Open an IRA
- Job Change
- Your spouse or parent dies
- You will set up a retirement date
"Professional publications" and "Websites Information IRA admitted" Mr. Slott resources are solid gold. Appendices, likewise, are valuable, especially the glossary.
My customers would like to have massive IRA do not expect to exhaust in your life. Unfortunately, most people are more concerned with just having enough in this life only once to maximize their children's inheritance. Examples of valuable jewels in the book include:
- Net Unrealized appreciation (NUA): If your retirement plan the company allows you to buy shares of the company, you can segregate that when he retires and possibly pay a rate much lower taxes on it;
- Stretch IRA for beneficiaries: This simple concept is emphasized repeatedly as a way to allow a second generation of beneficiaries of the IRA extend the requirement that they pay taxes on their inheritance while leaving the compound account value over a period longer time;
- Life Insurance Strategies: Mr. Slott is an eloquent advocate of retired life insurance portfolio as a means of enhancing assets and provide more options for both the spouse and children. For large properties, life insurance benefits are an essential resource to pay state taxes.
- Beneficiaries no spouse automatically assume that our legal spouse is the beneficiary logical in our retirement plan. That's not always the case, nor is it always an option for gay couples.
- Contingent beneficiaries: Always name a contingent beneficiary to avoid the possibility that their assets will inherit your IRA, and also to give your spouse the option to refuse the inheritance.
- Keep copies of your beneficiary designation forms, because you can not assume that your financial or banking institution will have them when their heirs have to prove they are the rightful beneficiaries.
Mr. Slott was kind enough to take time from your busy schedule to talk with me on March 9, 2011:
[Richard O'Boyle] One of the most important points of the book is its emphasis on properly designated beneficiaries. When you name a non-spouse beneficiary of a retirement plan no IRA (either because your spouse dies before you, or you are not legally married, for example), what issues are to be considered?
[Ed Slott] First, if you have a spouse does not have the same benefits and legal protections that a spouse. Even if you are negligent or careless, the product of an account is likely to go to the spouse in any way. If you want a person to get the plan, make sure you are listed as the beneficiary on the form. Everyone thinks that banks or financial institutions will have a copy of the form when the time comes, but institutions can be very sloppy. If the bank does not find that way, the great tax benefits may be lost, and your intended recipient may not ultimately get the bill. A beneficiary form surpasses the will and any other legal document. When we think of "non-spouse beneficiaries" often think of our children - and I arrived at this point of your blog - very few people think "domestic partnership" ... a gay couple is a non-spouse beneficiary. Even if they are married under state law under the federal tax code, they are not. The most important point for same-sex couples is to make sure to name each other as beneficiaries in the form.
[O'Boyle] Trusts can be exceedingly difficult, even for experts, so I suspect that many families value the eyes are closed. How can married couples do not preserve their wealth without being overwhelmed by complex documents and costly legal expenses?
[Slott] Again, the use of forms of beneficiaries is the most direct and infallible was to ensure that your wishes are followed. Perhaps some other members of the family do not approve of their relationship. Trusts are a way to ensure that the property is to be your partner. If your main concern is to make sure they get it, that can be done simply through the beneficiary form. Trusts are other issues, not necessarily tax issues. For example, if the intended recipient is a minor, disabled or incapacitated, or is a beneficiary who can not handle money. If that's a problem, then you will trust route. If these are not problems, then you might not need a trust. The beneficiary form is clad in iron and exceeds what may be even stated in a will.
[O'Boyle] There actually there are still plenty of people who have pensions provided by their unions or employers. How can homosexual couples get the same benefits as legally married couples when it comes to the survival and continuity of pension benefits?
[Slott] The only way to do this is to name as beneficiary. Now, I'm not an expert in all these plans and you have to go by the plan plan to see if you can not name a spouse as beneficiary. Another way is to take some IRA or pension money - you will have less pension benefit - but to transfer that money into an insurance policy life and surviving partner gets a piece of money through life insurance. That's a much better way to ensure that there is no money to try to go through a complicated pension plan.
[O'Boyle] Nobody knows where tax rates are headed, but conventional wisdom is that target higher. If rates increase dramatically, where people must change their future retirement savings?
[Slott] That's easy: a Roth IRA, because a Roth IRA is a hedge against uncertainty in tax rates going higher. You do not have to worry if tax rates go to 50 or 60%. You do not have to worry because it has been locked in a tax-free asset. Of course you pay taxes in advance now. It really does not matter how high they go. You can set up this time.
[O'Boyle] I can count the number of advisers in the "safe" celebrity positive on one side. By this I mean that the number of financial professionals who receive significant emission time are strong advocates of life insurance cash value as part of a retirement plan. Why life insurance cash value get a bum rap such?
[Slott] I am not a type of insurance, nor am I am expert in stocks, bonds or investments. I like life insurance as a vehicle tax. I think it's the single best benefit in the tax code as it gives you the ability to take small amounts of money and take advantage of tax-free. All that matters is the tax benefits and if paid with death. The type of life insurance depends on you and your counselor. Some people just want the most insurance for less money. But as you get older it is likely to be better with life insurance cash value. The raw get astronomical term and has nothing to show for it.
"The time bomb retirement savings ... and how to disable" is available on Amazon.com.
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