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Jim Lentini: Will your retirement assets stretch for you?

Posted: October 5, 2009 10:59 p.m.
Updated: October 6, 2009 4:55 a.m.
 
As you near the point where you can see that retirement will be a reality, you may wonder if your retirement assets will stretch far enough to do all the things that you would like.

Added to this issue is recovering the loss of values in their retirement accounts before they retire.

Worse, for those in retirement, having to adjust the income they are taking to not outlive their savings.

Depending on how you structure your distributions, with the help of your financial advisor and tax advisor, you make adjustments according to the current economic environment, your goals, assets, and structure of retirement asset distributions.

Make your assets go farther
Based on long-standing rules governing Required Minimum Distributions (RMDs), and beneficiaries, you can stretch your retirement assets over a longer period of time by carefully choosing your beneficiaries.

Here's how it works: When your retirement money is distributed to you, your first step is to move it to an IRA Rollover account, naming your spouse or someone younger as beneficiary.

When your spouse passes away, normally you would name your son or daughter beneficiary.

Then, they would name one or more of their children as contingent beneficiary. This is called a Stretch IRA.

Is a stretch IRA for you?
If you are thinking of retirement soon, or are already retired, you may wish to consider stretching your retirement assets over a few lifetimes.

Talk this through with your investment advisor and your tax advisor because they are the ones who know you best.

They will guide you through the process if it is appropriate for you.

A frequently asked questions is: What happens if, after my minimum RMD's have started, I change my beneficiary?

You can change your beneficiary at any time, but the tax rules for the RMD calculation governing this type of change can be very complex. You need to consult a tax adviser to understand how your distribution will be affected.

Another frequently asked question is, can I use the stretch on only part of my IRA?

If you split your IRA by executing new IRA applications, adopting separate IRA trust and naming separate beneficiaries.

This would give you the opportunity to exercise the Stretch option, provided you haven't begun your RMD. The RMD for each IRA account would be determined separately.

Lastly, what if I want to increase my payout?

When you are over age 70.5, or when the beneficiary is taking RMDs after your death, taking more than the required amount is always permitted.

However, you can't request a smaller amount once you have started taking the RMD.

Multiple trusts offer benefits
If you want to name more than one beneficiary of your IRA, consider establishing a separate IRA trust for each one.

The trusts allow each beneficiary to receive payouts based on his or her life expectancy.

If you designate multiple beneficiaries to a single IRA, then distributions would be based on the life expectancy of the oldest one.

Congress in 2001 liberalized the proceeds paid to a beneficiary, increased contributions to IRA's and SIMPLE IRAs.

And, contribution limits have increased, as well as catch-up provisions for those older than age 50.

With the volatility that has occurred from 2000-2002, and 2008, it is imperative to have adequate Asset Allocation in your portfolio.

Meeting regularly with your advisor will reflect your changing short-range goals and help to attain your retirement and long-range financial plans.

As our population ages, it is most important to not only prepare for taking care of our parents and ourselves with Long Term Care, the wealth we hope and plan to accumulate must be cared for by systematic planning, review, and being aware of economic changes and tax laws that will affect values and our net income.

Jim Lentini, CLU,ChFC,IAR is President of Lentini Insurance & Investments, Inc. His column reflects his own views and not necessarily those of The Signal.

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