Retire Safe & Tax Free - 8 Signs That an IRA/401(k) is Broken and How to Fix Them


piggy bank is broken

  1. You Have No Formal Distribution Plan or Exit Strategy.
    • 85% of the 77 million Baby Boomers have no formal distribution plan to transform their retirement nest eggs into a steady stream of income.
    • Few understand or have taken advantage of the new IRA distribution rules and run the risk that their nest egg will be "confiscated" by the IRS as it forces rapid distribution and, therefore, rapid taxation.

    THE FIX: We can fix it by putting in place a distribution and exit plan for the client and their family thereby preserving the beneficiaries' right to use their own life expectancies.

  2. You Are Not Taking Advantage of the Separate Account Rule.
    • If inherited IRA accounts are not being set up separately, the beneficiaries must use the age of the oldest beneficiary and this can have a major impact on the ultimate payout.

    THE FIX: Separate accounts with separate beneficiaries can be easily established and at no cost.

  3. You Have Improper or No Designated Beneficiaries.
    • Only "designated" beneficiaries can stretch.
    • Only the owner may name designated beneficiaries prior to their death.
    • If there are no designated beneficiaries, the beneficiaries may have to pay all taxes in a lump sum or use the owner's life expectancy if distributions have begun-in either event the stretch is lost.

    THE FIX: Use our IRA Discovery Checklist System to determine if the owner's contracts have proper designated beneficiaries and if not, fix it!

  4. You Are Using a Trust or Will to Name Beneficiaries.
    • According to IRS Publication 590, "The separate account rules cannot be used by beneficiaries of a trust."
    • All beneficiaries will be forced to use the oldest beneficiary's life expectancy.
    • Using a WILL to set up IRA beneficiaries does not establish "Designated Beneficiaries". The IRS will therefore treat the IRA as having no designated beneficiary.

    THE FIX: Assist clients in properly designating their beneficiaries.

  5. You Have Too Much of Your IRA at Risk in the Market.
    • Market losses can dramatically change the income streams to the owner, spouse, children and grandchildren.
    • The simple fact is, you can't have a guaranteed income from a nonguaranteed account.
    • 83% of IRA assets are exposed to market risk.

    THE FIX: Do we really need to explain this one?

  6. You Are Still Paying Fees and Loads on an IRA.
    • This can destroy any IRA streams of income by up to 50% of the potential payout.

    THE FIX: Varies by client.

  7. Your Money is Still in an Employer's 401(k), 403(b), Simple IRA or 457 Plan.
    • Given recent events, this is less of an issue but the fact remains that the funds maintained in an employer plan are NOT as flexible as an IRA.

    THE FIX: Roll over plan amounts to an IRA.

  8. Your Current Financial Advisor is Not an IRA Distribution Expert.
    • Less than ½ of 1% know the rules.
    • Advisors unknowingly are giving bad advice.
    • The consequences can be devastating.

    THE FIX: Marc H. Weiss, Archer Weiss Insurance & Financial Services, Inc. Please Call Toll free: 1-800-831-2901.