The reality is, we tend to spend our time focusing on accumulating assets and retirement funds but what happens when it’s time to draw down those accounts and tap into our assets? It’s not always easy to shift gears and suddenly have to worry about finances and (gasp) stick to some kind of budget once we hit retirement. What happens, for example, if you have significant assets in the market and it takes a dive like it did a decade ago…what is your retirement exit strategy in that situation?



With incredible developments in technology and science, the good news is we’re living longer but the bad news is many of us aren’t financially prepared to live longer. When was the last time you reviewed your retirement distribution strategy? What if you or your spouse are suddenly faced with a long-term or debilitating illness, do you have a plan in place to protect you and your family? Most people are uncomfortable talking about this subject but it’s important to not only plan for a long retirement but to also plan for things like taxes and a sudden and/or extended illness.



You can avoid potential doom and gloom during retirement if you engage in proper planning today. There are strategies available to help protect your nest egg and make sure you have a sound plan in place to handle a long-term care event.


A review of your retirement and financial plans will help determine if there are any holes in your strategies that could possibly lead to disaster down the road. These reviews are FREE services offered by retirement distribution specialists so there is no reason to spend another day with your assets and financial future exposed to potentially harsh elements such as stock market volatility, excessive taxation and unexpected illness. Reach out to your personal retirement distribution specialist as soon as possible to discuss strategies that may be appropriate for you – if you don’t already have the right strategies in place, how can you truly be financially prepared for retirement?


Rolling Over Your 401(k)

When you leave your job or retire, what happens to your 401(k)? Your plan administrator probably provided you with a few options. The most popular option is to rollover your 401(k) into an IRA. Before you make a decision, make sure you have fully explored your available options and strategies to maximize the account and your retirement income



Did you take out any loans from your 401(k)? If so, those outstanding loans must be repaid, typically within less than 60 days. Be sure to check with your plan administrator for the repayment details and deadline, otherwise the loan will be considered a fully taxable distribution and could be subject to a 10% early distribution penalty in certain cases.

If you do a regular 401(k) rollover, keep in mind that there is a 20% withholding requirement and you will need to make up that difference to complete the rollover within 60 days. However, if you request a trustee-to-trustee transfer instead, sometimes called a “direct rollover,” you can avoid a 20% withholding.

IRAs and Charity

Charitable giving is always encouraged and will be TAX-FREE if the receiving organization has tax exempt status! Charitable deductions for estate tax may also be available—when a decedent leaves property to a qualifying charity, it is deductible from the gross estate.

If you have an IRA, the IRS made the Qualified Charitable Distribution option permanent, allowing individual IRA owners over the age of 70½ to exclude from gross income up to $100,000 that is paid directly from their individual retirement accounts (excluding SEP or SIMPLE IRAs) to a qualified charity.


One Per Year Rule Applies to ESAs

Just like IRAs, the one per year rollover rule also applies to Education Savings Accounts!


Many Americans opened Coverdell ESA accounts to pay for qualified educational expenses for a designated beneficiary. An ESA must be established and contributions made while the beneficiary is under age 18 (*unless a special needs beneficiary is involved).



ESA distributions that aren’t more than the beneficiary’s adjusted qualified education expenses for the year are tax-free. ESA assets may be rolled over to another ESA. However, the IRS has clarified that the one per year rollover rule also applies to rollovers of ESA accounts. Trustee-totrustee transfers are still unlimited. See IRS Publication 970 for additional information on ESAs.


Retirement Rollover Chart

Rollover rules can be confusing but remember that the IRS holds taxpayers responsible for knowing those rules. Here is a simple, quick reference chart to help guide you:

Using an IRA Disclaiming Strategy

Why would anyone want to disclaim an IRA they inherit from someone? The reasons vary and may include things like not wanting to be bumped into a higher tax bracket or an heir may simply not need the money and would rather the IRA go to another designated beneficiary. Regardless of the reason, once the decision to disclaim is made, it is important for the disclaiming beneficiary to avoid common errors.


In short, a disclaimer is a legal document and formal refusal of an inheritance by a beneficiary. Disclaimer rules apply to all IRA beneficiaries. Beneficiaries are not required to accept an IRA or any portion thereof and may instead choose to disclaim all or a portion of their share.

To have a valid disclaimer, the beneficiary must not have accepted the IRA assets or property. The only exception to this rule is the year of death RMD taken for the deceased owner. All disclaimers must be submitted in writing to the IRA custodian within 9 months of the IRA owner’s death. Disclaimers are irreversible, permanent decisions. Some beneficiaries make the mistake of disclaiming an IRA, intending to pass on the disclaimed assets to someone else like their child or spouse.

However, the beneficiary cannot redirect disclaimed assets. Disclaimed IRA assets may only go to the contingent beneficiary or beneficiaries named by the original owner. Disclaiming beneficiaries have zero control over the disclaimed amounts and how they flow – the beneficiary form is the controlling factor that tells you where the money will go if you choose to disclaim.


Correcting Missed RMDs

Are you an IRA owner over age 70 ½ but forgot to take your RMD by December 31st? Did you inherit an IRA but didn’t know you need to take RMDs from that IRA? Have you missed an RMD for more than one year? If this sounds familiar, not all hope is lost. You may qualify for a penalty waiver from the IRS under certain conditions.


Request a Waiver from the IRS It is important to understand that the IRS determines whether a waiver will be granted or denied. Once you discover an RMD error, you need to take immediate steps to correct the error. A waiver will only be granted for “reasonable” cause.

50% Penalty A missed RMD carries the burden of a 50% penalty on the undistributed amount. If you are requesting a waiver, you do not pay the 50% penalty up front. After the IRS has made its determination, you will be notified whether you owe a penalty.

How can you make sure you are never in the position of having to request a missed RMD waiver? Simple, make sure your IRA custodian provides you with an annual RMD notice and offers to calculate your RMD for you. If your current IRA custodian doesn’t provide such services, you can elect to relocate your IRA to a custodian that will. There are many IRA custodians out there that look out for their customers and help them avoid RMD errors.

Get the Assistance You Need! Understanding IRA rules and especially missed RMD waiver requests can be daunting. If you have questions or believe you need to request a missed RMD waiver, your retirement distribution expert or personal tax professional can help you.

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