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Avoiding
Common IRA Owner Mistakes
As more "baby boomers" are retiring and rolling
over large 401(k) and other retirement plans to IRAs, proper
tax and estate planning for IRAs have become increasingly
important.
There have been several major changes with IRA laws and
taxation, including crucial changes made when the Pension
Protection Act was signed into law August 17th, 2006. The
government will not notify you of these changes. It is your
responsibility to know and understand how these changes
will impact you and your loved ones. Otherwise, how do you
know if you have enough income to last throughout your retirement?
Additionally, how does your income situation change upon
the death of your spouse? Are you going to run out of retirement
money early?
If you do not do the proper planning, anywhere from 35%
to 70% of your IRA can go towards paying income, estate
and penalty taxes when you pass away. In order to prevent
this from happening, the government has provided an avenue
known as a stretch distribution strategy. It is a strategy
that allows you to pass your IRA down to your heirs and
allows them to take distributions over their lifetime.
Something you should consider when planning for the distribution
of your IRA to your heirs is using an IRA inheritance trust
to control the distribution of your IRA assets. An IRA inheritance
trust is a stand-alone trust that protects the beneficiary’s
inheritance from creditors and from being taken during a
divorce.
Many individuals do not realize the mistakes they have made
with their IRA planning and the long term impact those mistakes
can have on their retirement. It is crucial to consult with
an IRA specialist to review your retirement plans to develop
a game plan to provide lifetime income you and your heirs
will never outlive.
This educational article was written to make you aware of
important issues many people face when planning for the
distribution of their IRA. Before you make any decisions,
it is important that you consider all of the advantages
and disadvantages of those decisions. You should always
consult a legal, tax or financial professional for this
advice. None of the topics discussed in this article are
meant to give legal, tax or financial advice, and should
not be interpreted that way.
South Texas Tax Advisory Group sponsors this article. Brooklynn
Chandler Willy is an Associate with them and she specializes
in IRAs, 401K rollovers, and IRA Inheritance Trusts. South
Texas Tax Advisory Group is a full service firm offering
estate and retirement planning with a skilled staff of legal,
CPA, and financial professionals. The office is located
at 265 Landa Street in New Braunfels. She can be reached
at 877.704.4412.
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