IRA Distribution Planning

Retirement planning is a little like golf. You start at Hole #1 and first play the "Front 9". In retirement planning, this is called "The accumulation phase." In the financial services world, there is great emphasis put on this phase. Why? Because that's where financial services firms make their money!!! Plus, that's actually the easier part.

After you've played the Front 9, you make the turn and play the "Back 9." In retirement planning, this is called the "distribution phase." Guess how much attention the financial services industry gives to the distribution phase? Practically none! Why? Well, the distribution rules are complex, they require a great deal of time, attention and study and it's not a process in which large investment firms can make money doing.

"Combined, income and death taxes could boost what your kids pay on the remainder of your 401(k) [and IRA] to more than 80 percent."
-The Wall Street Journal, editorial page, February 25, 2002

Why does this major tax hit occur? Due to a wonderfully complex combination of estate and distribution taxes that occur at retirement or death, many people risk losing substantially more of their retirement savings than they'd ever imagined. But with proper upfront planning, these taxes can be minimized.

The main goal of IRA (and other retirement account) distribution planning is:

1. Protect the retirement savings account that you've spent your entire life building, from excessive taxation, and
2. To properly set up the retirement savings account to keep it growing tax deferred for as long as possible during your lifetime and for at least a generation after your death.

So, if your financial advisor has truly been trained on all the complex IRA distribution rules and you're absolutely certain that you're getting expert distribution planning counsel and advice, congratulations! You're one of the lucky ones. If you have any doubt, give me a call.