Spousal Inherited IRA: Take It or Leave It

If you are married, you may have discussed with your spouse what you plan to do with each others estates should one of your pass before the other. This discussion–and other similar ones–is important and can make the period after the passing of a spouse less difficult than it needs to be. As part of those discussions, you may want to talk about what you both will do with an Inherited IRA, if you or your partner have one. There are really three main options for the spouse inheriting the IRA. The first is to leave the IRA as it is and begin taking distributions based on your own life and related factors. The second option is to rollover the IRA to an inherited IRA, which is the same option that a non-spouse beneficiary has. The final option–this is one that only spouses have–is to rollover the IRA into an existing or new IRA that is in your name. If you choose this third option, you will need to notify both the custodian of the IRA you are rolling over into as well as the custodian of your spouse’s account. Also, if you choose¬† the first option, you can treat the IRA as your own if you make a contribution or fail to take required minimum distributions (RMDs) as if the account were inherited. It should also be noted that you may have to take additional steps if there are other beneficiaries listed for the IRA you inherit. These options can include getting the other beneficiaries to disclaim the inheritance. Another possibility is taking a distribution of your share of the account and rolling it over to an IRA in your own name within 60 days of receiving the distribution. As you can see, there really is no right or wrong option and your decision will most likely be impacted by where you are at that point in life as well as your own retirement account situation. Regardless of what you decide to do with an inherited IRA, you should speak with a certified financial planner or wealth manager before rolling anything over to ensure that you are following all the proper steps.

Knowing What Your Getting Into With Retirement Paperwork

There’s a lot of fine print on any paperwork associated with a financial account. Whether it’s a bank account or an IRA, the amount of legal jargon and required information can be pages long and mind-boggling to understand. However, that should not stop you from knowing what you can and cannot do with your financial accounts. This is particularly important when it comes to your retirement accounts and beneficiaries. First off, you want to make sure that you designate beneficiaries and update that information as needed. Next, you will want to know what your beneficiaries can and cannot do with your account and adjust accordingly. Certain accounts allow beneficiaries to do certain things. If you find that your account doesn’t allow your beneficiary to, say, place the money in an particular type of account when they inherit it, then you may want to consider putting your money in an account that allows that. Another important thing to understand with retirement accounts is the custodian policies involved. Each custodian may have varying policies depending on the state they operate in or their own personal preference. Knowing such policies can save both you and your beneficiaries headaches in the future. Believe it or not, there are certain circumstances when the custodian can dictate what happens with your money when you pass on. Such situations can make a tough time all the more difficult for friends and family who might be working to probate or distribute your estate. Furthermore, custodial policies can affect your ability to transfer money between your retirement accounts and can make what you think is a simple transaction really frustrating. Now, it might be overwhelming to have to sit down and read pages or legal mumbo-jumbo, but it’s worth it. Furthermore, you may find that you have questions after reading such documentation. I encourage you to reach out to your custodian to ask those questions and make sure you are satisfied with the answers.

The Best Way to Avoid Rollover Complications

Do you want to know a little financial secret on how to avoid rollover headaches? It’s simple, don’t do them! I’m not kidding. Rollovers, especially 60-day rollovers, can be complex as there are limitations on how many you can do each year and how long you have to move the funds. If you don’t read up on the rules or track the time between when the funds are disbursed to when they must go back into an account, you and your retirement funds could be in for a world of hurt. And yes, there are ways to avoid a rollover altogether. The best–and most efficient–ways to do so are through transfers and direct rollovers (yes, I know this is about avoiding rollovers, but direct rollovers are an exception). If you are moving money between IRAs of the same type (i.e. Roth IRA to Roth IRA), then you will want to do so through a direct transfer. If you are moving money from an employer plan to an IRA, then you will want to do so through a direct rollover. By using either of these types of transactions, you can avoid rollover issues, particularly those pertaining to 60-day rollovers. Aside from avoiding 60-day rollover rules, direct transfers in particular, also allow you to circumvent the once-per-year rollover rule too. This means that you can do as many as you need or want to do. The key to these types of transactions is that the money moves from custodian to custodian and not from custodian to you. If the money is sent to you, then it’s treated like a distribution and can open you up to certain rules and limitations. You don’t want to deal with that! As always, if you have questions about direct rollovers and transfers, you should speak with a certified financial planner.

Do You Understand Your Employer Retirement Benefits?

Many companies offer retirement benefits. Those benefits can range from simply offering 401(k)s to a wide range of financial resources that can include financial planning and multiple retirement account options. Furthermore, with legislation working it’s way through Congress that could allow small businesses to band together to offer retirement savings plans, more Americans could find themselves working for an employer that offers such benefits. Regardless of the size of the company you work for, if you are taking advantage of any employer offered retirement benefits, you need to make sure that you understand what those benefits entail and what their limitations are. There are many ways to go about that. One easy way to understand your retirement benefits is to read over any paperwork you received or filled out when you first entered the plan (which you should have kept in a safe place or be able to access online). That paperwork most likely will tell you what you can and cannot do. If you have questions beyond that, you should be able to reach out to the custodian of your retirement plan. If you work for a larger company, you may have a benefits manager that you can reach out to. While they may not know all the answers, they should at least be able to point you in the right direction or get you in touch with a plan custodian who can help. If your company offers retirement planning talks or events centered around planning for retirement, you should try to attend those if possible. If you are new to the retirement savings game, try to make sure that you understand as much as you can about your retirement savings plan, particularly what you can do with it should you choose to leave your employer as well as your ability to change contribution rates. If you are not new to the retirement savings game and have had a retirement plan through your employer for years (or decades), you will want to make sure that you stay abreast of any changes to those plans and how such changes could potentially impact your future distributions or ability to rollover the plan. As always, if you need help with deciding what to do with your employer retirement plans or you want to combine it with an IRA, you should speak with a certified financial planner.

How to Prepare for Retirement as a Sole Proprietor

Owning your own small business or sole proprietorship can be a lot of work. Depending on what industry you operate in and what your overhead costs are, it can be tough to eek out a profit or pay yourself what you really think you’re worth. Thus, planning for retirement as a small business owner can seem like a fruitless endeavor, especially if you are struggling to keep your business afloat. However, that doesn’t mean you can’t save for retirement. You can open an IRA and will have options regarding what type of IRA you open regardless of how much you make. You could do a traditional IRA, a Roth IRA, or Simplified Employee Pension (SEP) IRA. You may be asking yourself what a SEP IRA is. It’s a relatively simple and inexpensive retirement account that is popular among small business owners and sole proprietors. They are easy to administer and come with relatively straightforward rules. There are some nice perks to SEP IRAs. First off, if you make a contribution to a SEP IRA, you can also still make a contribution to a Roth or traditional IRA in the same year as long as you are eligible to do so. Another advantage is that a SEP contribution may be made to the same IRA to which you make your traditional IRA contribution, so long as it as your custodian allows it and you are eligible to make a contribution. Finally, there is no age limits on making contributions. You can make contributions as long as you are still working and eligible to make one. The one drawback to a SEP IRA is that you cannot do a salary deferral. Therefore, you have to make the contribution yourself. If you are a small business owner and considering a SEP IRA, you should talk with a certified financial planner to make sure you do so correctly and to set a plan for making contributions.

Why Direct Transfers are the Way to Go

When you transfer money between an IRAs or between a qualified retirement plan and an IRA, you’ve probably heard that the best way to do so is through a direct transfer. But do you know why that is? First off, it’s incredibly simple as the money never touches the hands of the account holder and goes from custodian to custodian (or from account to account). Another advantage of a direct transfer is that there is no limit on the number of transfers that can be done over the course of a year, unlike a 60-day rollover which you are limited to only one per 365 days. Another positive in terms of direct transfers is that they are not subject to any withholding rules, which leaves more money in your pocket. Finally, there are certain situations in which a direct transfer is the only way to transfer money. Such situations in which a direct transfer is required is when an Inherited IRA is to be transfer from one custodian to another or if IRA assets are awarded in a divorce proceeding. While all these things make direct transfers very appetizing when it comes to moving money between accounts or custodians, it’s really the ease and simplicity that are the biggest selling points. If you are considering a direct transfer of your retirement funds between accounts or custodians, be sure to talk with a certified financial planner to make sure you follow all the proper steps.


Would You Know If Someone Hacked Your Retirement Account?

Technology has drastically changed the retirement saving and planning game. It has made loads of information regarding retirement saving and planning available to the average person and has allowed people to access their retirement savings and information from their mobile phones and tablets. However, technologies introduction into the retirement savings world has also created new vulnerabilities that you need to be aware of, particularly fraud and hacking. It seems like every month a big company or financial institution suffers a data breach where personal and private information for thousands, if not millions, of accounts are stolen. Once that data is in the hands of the hackers, there are many ways that they can attempt to access your accounts and drain your nest egg. So, how do you protect yourself? First off, in order to protect yourself, you need to know how much you have saved and what approved transactions have occurred in your account. It’s hard to know if you’ve been hacked if you don’t know what you have saved or what transactions you have approved. If you notice that your account is lower than the last time or checked or saw unapproved transactions occurring, you should contact your account custodian as soon as possible about it and make sure they are aware of such activity. You should also heed any data security warnings that your account custodian sends to you. If they tell you to change your passwords because of a data breach, you should do so. You may also want to get into the habit of changing your password once a year or every couple of months so as to make it harder to hackers to access your information. You won’t be able to prevent the breach from occurring, but you can take steps to protect your money by making it much harder for hackers to access it if they do have it. If you want further advice about how to protect your account or the safety features on your account, you should speak with either your account custodian or a certified financial planner.

Using an Employer Plan to Avoid RMDs

Today’s post is focused on employer plans–most likely 403(b)s and their potential to help you if you plan to keep working past age 70 1/2. As you may well know, when you reach the magic age of 70 1/2, you must begin taking required minimum distributions (RMDs) from IRAs that you own. However, if you have an employer-plan that offers a “still working exception” you can roll your funds into that and avoid taking RMDs until you retire. Now, there are a lot of complexities to that, including the fact that you must be employed by the employer for the full year and that the exception does not reduce the tax bill involved (which many people incorrectly assume). Furthermore, the employer plan must be able to accept a rollover of the IRA funds and must–of course–offer a “still working exception.” Also, as noted before, the “still working exception” does not lower your tax bill, but rather just delays when you pay the taxes and how much you pay. Remember, the longer you put off taking RMDs, the larger your account balance will be, which means your RMDs will be bigger and require a larger tax amount. The IRS¬†will get it’s share! If you are considering taking advantage of an employer plan that offers a “still working exception” with the specific purpose of working past 70 1/2, you should learn as much about the plan and what it offers first before rolling over any money into it. You may want to talk with the plan custodian or your benefits manager (if you have one) at work. You can also learn more about the complexities of the “still working exception” by speaking with a certified financial planner.