How to Make Sure Your Nest Egg Lasts The Rest of Your Life... And Then Some!
Your job is harder than ever.
Forces are at work threatening your plans to establish and maintain lifetime income security.
I've been monitoring the threats to building a reliable retirement income stream for more than 25 years, and I've never seen a situation as dangerous as today's.
Many retirees and near-retirees are being set up for a rude surprise, not only by the IRS -- who's clamping down on retirement income -- but also by trends that are gathering strength.
Investors, especially IRA owners, are facing unprecedented threats to their financial freedom and independence... So it's understandable why more investors' goals have shifted to:
Keep my principal secure. Pay me income. Protect me from inflation.
As the Baby Boomers approach their post-career years, they focus on preserving their hard-earned nest eggs and receiving steady cash flow from their portfolios.
They want to ensure they'll have enough income and assets to meet their lifetime goals. Steady, secure income means financial independence.
That's why, as the Baby Boomers age, interest in developing a continuing, stable stream of cash is, well, booming.
Unfortunately, the second decade of the 21st century is the most challenging time to try to meet these goals.
Not too many years ago, it was easy to convert a pre-retirement portfolio into a reliable stream of cash flow that replaced your working years' income. It was so easy the financial services profession didn't put much research and work into retirement income management.
Only a few of us focused on issues such as how to plan withdrawals from IRAs, reduce taxes on retirement income, and most efficiently include annuities in a retirement portfolio.
Now, income security is a prime concern, and the Baby Boomers and their financial professionals are struggling to catch up.
Tough decisions need to be made about IRAs, 401(k)s, medical insurance, investments, taxes, estate planning, and more. Many of the decisions are irreversible. Make the wrong choice, and the rest of your retirement plan might not matter.
More importantly, changes are taking place in the economy, the markets, government policies, and employer practices.
And even though the Federal Reserve has finally started to raise interest rates, they're doing so at a snail's pace to keep inflation in check.
At the same time, the new administration is cutting programs while employers are slashing benefits. Wall Street and the markets, of course, aren't helping much.
That's why more and more people believe war is being waged on retirees and those planning for retirement. Sadly, they may be right.
The Numbers Don't Lie
In 1989, only 30% of Americans ages 30 and older were financially unprepared for retirement, according to the Center for Retirement Research (CRR). In 2014, CRR estimated 52% of Americans over 30 are likely to fall short.
In 2015, USAToday printed a story saying only 28% of Americans have more than $1,000 in savings and investments that could be used for retirement...
And that 67% of Americans think they'll be working through their retirement.
Government data show that after many decades of declining savings, the average retirement age has been increasing.
Even those who think they're prepared for retirement often aren't. Almost half of all Americans die with financial assets of less than $10,000, according to research by James Poterba, an MIT economist.
Many Americans enter retirement with what seemed to be a substantial amount of financial assets, but, because of mistakes and unforeseen events, they spend faster than they should or anticipated, and end up with few assets.
It doesn't have to be that way for you.
You can be financially secure during your post-career years, free of the worries that will plague many others in the coming years.
But you can't rely on what worked in the past.
Following tired "rules of thumb" and traditional cookie cutter approaches is the road to income insecurity. You don't need to travel down that road.
You can find plenty of retirement advice online, in books and magazines, and other places. But you'll find mostly a rehash of the old rules of retirement.
More importantly, many of the real questions you face won't be addressed, and there won't be updates as the rules of retirement change.
You need to use strategies and tools that are different from those that worked for past generations of retirees.
Retirement has changed and will change again. The markets and economy, tax law, estate planning, health insurance, Medicare, Social Security, long-term care, annuities, and all the other financial aspects of your post-career life are being transformed.
You need to be on top of the changes and know how these new rules of retirement will affect you.
That's exactly what you'll find in my just-updated special report, The Little Black Book of IRA Secrets.
Defuse the Ticking Time Bomb in Your IRAs
IRAs are the most valuable assets the vast majority of people own, and a key part of the retirement solution for many Americans. Often, financial security depends on making that IRA wealth last beyond a lifetime.
But the IRS is counting on extracting a lot of taxes from those IRAs to pay for the government's spending plans.
The tax code and regulations are filled with detailed rules that come into play when it is time to consider withdrawing money from IRAs.
One simple mistake or oversight in managing your IRA could result in lost opportunities, unnecessary taxes, and even penalties.
To meet your financial goals, you need to manage a host of new challenges, including: the mortgage on your IRA, the RMD waterfall, the attack on Stretch IRAs, and other obstacles.
That's a big reason why I wrote The Little Black Book of IRA Secrets. I've heard too many stories of people making preventable mistakes in retirement, such as:
Paying higher taxes on their IRA balances than they needed to,
Knowing the long-term costs of required minimum distributions,
Managing their IRAs to stay in the 20% tax bracket (or lower) for life,
Judging when it makes sense to convert to a Roth IRA,
Forking over a fortune in extra taxes and penalties due to errors in estate planning or inherited IRAs.
With The Little Black Book of IRA Secrets, you can avoid the classic mistakes of IRA management, discover strategies that can increase the after-tax value of your IRAs and more.
IRAs used to be simple. You make a contribution, decide how to invest it, and leave the IRA alone until it's time to make next year's contribution.
Some of you might recall when the maximum contribution was only $500 and banks would even offer gifts for opening a new IRA.
Managing IRAs is much more complicated now.
The good news is that your IRAs are still among the most valuable and powerful tools in your retirement arsenal.
Even better, there are actions you can take to maximize the after-tax value of your IRAs and even use them to leave a substantial after-tax legacy for your loved ones or charity.
We discuss these in my Little Black Book as they're critical strategies to effectively managing your IRA, helping you achieve financial independence and overcome the challenges to a safe, secure retirement.
But today -- with the new rules of retirement -- much has changed in the tax code, IRS regulations, and other factors that affect your IRAs. Strategies and information you learned years ago often don't work today.
Plus, new strategies for maximizing the after-tax value of your IRAs have been developed. Allow me to explain...
Slashing the Cost of Your "IRA Mortgage"
Most people's IRAs aren't as valuable as they think.
A big reason why is that IRAs and 401(k) accounts essentially come with mortgages on them, and few people realize how big those mortgages are.
Here's what I mean by "mortgages on your IRAs"...
You see, traditional IRAs and 401(k)s have a lot of tax breaks on the front end. IRA contributions often are deductible, and 401(k) contributions are excluded from income.
Over the years, those contributions can be invested, and the gains and income compounded free of income taxes.
When you withdraw the money and want to spend it, however, the taxes kick in -- in spades.
First, the contributions that were deducted or excluded from income when you put them in the account get taxed when you withdraw them.
Second, the compounded income and gains are also taxed when you take them out.
Third, they are all taxed as ordinary income, so you lose the tax advantages of any long-term capital gains or qualified dividends earned.
Those taxes are the costs of tax deferral, and they are the same as a mortgage on your IRA.
Don't forget that your IRA distributions will be taxed along with the rest of your income, so you could be paying a tax rate as high as 39.6% on the distributions, plus any state income taxes.
Can you see now why the real value of your IRA isn't the amount listed on your statements? The real value is the IRA's market value minus the taxes that will be due on the distributions.
You spend only the after-tax value, while the IRS gets the rest.
But what if you try to withdraw as little of the IRA as possible and let your loved ones inherit it?
They'll get stuck too, as they'll pay taxes on traditional IRA and 401(k) distributions just as you would have, but at their own tax rates. The mortgage still has to be paid.
The mortgage on your IRA is just one reason why managing your IRA under today's new rules is more complicated than ever.
So how do you maximize the real value of your account? Well, you need to know how to make IRAs last.
I've studied and researched in great detail how to stretch an IRA. I've learned that a few simple, but often overlooked, steps can ensure your nest egg churns out distributions longer, years longer.
I've also learned that there are pitfalls in the tax code into which too many people fall, diminishing the value of their IRAs.
And I've learned that the IRS is now focusing on these tax code loopholes to crank up the taxes they collect from you. Specifically, the IRS is now focused on these four areas in particular:
Required minimum distributions (RMDs): Many people don't calculate their RMDs properly or otherwise fail to distribute the required amounts. The penalty is 50% of the amount that was supposed to be distributed but wasn't.
Contributions: People routinely contribute (or deduct) more to their IRA than they are allowed to, or they deduct more than they're entitled to. Both errors can mean massive penalties.
Investments: Some investments are prohibited for IRAs, while others you can only make a certain way. In some cases, the penalty for making a prohibited investment is to disqualify your IRA and include the entire balance in your gross income.
Aggressive Roth Use: The Roth IRA is a great retirement and estate planning tool. But some people are promoting strategies beyond their limits. You must avoid these aggressive Roth IRA strategies or face the consequences.
With the IRS focusing on these areas, you need to know the nuts and bolts of managing IRAs now more than ever. Otherwise, the IRS will take more of your hard-earned nest egg through taxes, interest, and penalties.
Unfortunately, I've also discovered that few people even consider the most effective ways to manage their IRAs.
Or if they do, too many simply assume that the same widely-held rules of thumb used by their parents are still the best ways to go. While that may be the case sometimes...
Today, if you're not asking these questions about IRA management, you're setting yourself up for a fleecing by the taxman.
Which investments should be held in IRAs and which in taxable accounts?
Which accounts should you draw down first in retirement, and when? Taxable accounts? IRAs? Roth IRAs?
How do you determine the best investment to sell for the lowest possible tax bill?
What are the 3 little-known ways to outfox the tax man when trading stocks in your taxable investment accounts?
What's the one and only time it makes sense to hold stocks in an IRA instead of a taxable account?
What are the asset allocation decisions you need to make in your taxable and non-taxable accounts to save you thousands of dollars in taxes?
In addition to asking the questions above, if you don't know the answers to the following, you're not doing everything you can to grow your retirement savings and stiff-arm Uncle Sam:
How do you safely add gold, silver, and other hard assets to your traditional IRA?
How can you employ the same strategy used by Yale University to protect its billion-dollar accounts to safeguard your IRA?
How can you buy your dream vacation home using your IRA?
What are the 4 easy steps to follow to convert multiple IRAs into one Roth IRA?
How can you take your required minimum distribution without liquidating a single share of stock in your traditional IRA?
What are the 2 simple steps to take to avoid the withdrawal mistakes that could make your Roth IRA vulnerable to a massive IRS tax grab?
When does it make sense to convert a 401(k) to a Roth IRA?
You'll find the answers to these questions and more in my Little Black Book of IRA Secrets...
A special report I give away FREE to members of my monthly advisory service, Retirement Watch.
For more than 25 years, Retirement Watch readers have been getting the details on these and other savvy ways to manage their IRA and other retirement accounts each and every month.
In fact, to give them even more guidance, I've combined many of these new insights into another Special Report I've written called, The New Rules of Retirement.
This report is also available for FREE to Retirement Watch members.
I'll tell you how easy it is to become a Retirement Watch member -- and get both of your FREE Special Reports -- in just a moment.
Right after I tell you how to...
Fend Off the Retiree Tax Attack
It used to be that taxes and tax rates would decline in retirement. You could count on it. Now, this belief is one of the most dangerous myths in retirement planning.
In fact, these days, it's rare for someone's taxes and tax rate to decline after retiring. In many cases, a person's marginal income tax rate actually increases in retirement, and retirees can face some of the highest marginal tax rates in history.
You have to protect yourself from the Retiree Tax Attack, especially when it comes to "Stealth Taxes."
For years, Congress and the IRS quietly looked to older Americans to increase government revenues. After all, older Americans are the richest generation in history.
You may not think you're rich, but Congress does. State and local governments are also desperate for cash and have been raising taxes.
Congress doesn't want to increase tax rates, so it sneaks in a bunch of what I call Stealth Taxes. What makes Stealth Taxes so painful is that, while Congress doesn't say it is targeting retirees with them, Stealth Taxes hit those in or near retirement age much more than other taxpayers.
And IRAs often play a big role in triggering Stealth Taxes.
There are quite a few Stealth Taxes, and you might have even heard of some of them. But many people don't learn about them until after they retire. Then, those first lessons are painful and expensive.
Here's a list of what I call, Deadly Stealth Taxes:
Income taxes on Social Security benefits
Surtax on Medicare premiums
Phasing out personal and dependent exemptions
Reductions in itemized expense deductions
Alternative minimum tax
3.8% surtax on investment income
There are other Stealth Taxes, of course, but these are the main ones.
Another is what I call the "RMD Waterfall," and it comes from traditional IRA distributions.
A major reason is that, after turning age 70½, you're forced to take minimum annual distributions from your IRAs, known as the required minimum distributions or RMDs.
The goal of the RMD is to force people to draw down most of their traditional IRAs over their life expectancy.
IRS life expectancy tables are used to determine the RMDs. In the tables, the percentage of the IRA you are required to distribute increases each year.
Many people find that when they reach their late 70s or early 80s, the RMDs are far higher than needed to meet their spending needs.
Yet, they are required to take the distributions and include them in gross income. The RMDs result in higher income tax bills. Because the RMDs continue to increase each year, I call it the "RMD Waterfall."
Even worse, the increasing RMDs can trigger even more Stealth Taxes.
You see, Stealth Taxes are generally based on your adjusted gross income (AGI). The higher your AGI, the more likely you are to be hit with one or more of the Stealth Taxes. As AGI further increases, many of the Stealth Taxes increase.
So, RMDs increase not only your regular income taxes, but can also trigger or increase the Stealth Taxes.
Though not specifically directed at retirees, Stealth Taxes are paid by a high percentage of retirees, thanks to the "RMD Waterfall" and other factors. Retirees are often blindsided by these higher taxes.
Manage Your Tax Bracket to Pay Just 20% for Life
The good news is you can fight back. Retirement Watch readers know how to beat the Retiree Tax Attack. They know that reducing their income taxes is a key to maintaining financial independence in retirement.
Most tax advice still focuses on reducing taxable income. But that doesn't help you avoid or reduce Stealth Taxes.
To do that, you need to reduce AGI. There are tens of thousands of dollars, perhaps even more, in potential tax savings waiting for every retiree to grab and stuff back in their nest eggs.
Retirement Watch readers also know an important step in reducing AGI and beating Stealth Taxes is to establish tax diversification.
You know about investment diversification. Well, tax diversification is at least as important to retirees.
There are different types of financial accounts available, and these accounts are taxed differently.
You could try to guess what the tax code will look like in the future and steer as much of your wealth as possible into the type of account that would benefit most in that environment. But that's a risky game.
If you're wrong about the future tax code, you're likely to pay a lot of extra taxes. It's better to diversify your nest egg among all the types of accounts available.
Own some traditional IRAs and 401(k)s, Roth IRAs and 401(k)s, taxable accounts, annuities, and any other accounts available to you. That way, no matter what the tax code looks like in the future, you're likely to have some tax-advantaged accounts.
More importantly, you'll be able to manage your tax bracket. That is another key to minimizing lifetime taxes and avoiding Stealth Taxes.
Here's how to manage your tax bracket.
You'll have some types of income for which you'll have no control over once they begin -- Social Security and RMDs from retirement accounts, for example.
There might be interest, dividends, and mutual fund distributions paid to taxable accounts as well. You might have a pension, an annuity, and some other income sources.
When you have tax diversification...
You decide how to take money from those other accounts to meet the rest of your spending needs.
You can take money from traditional IRAs and 401(k)s to be taxed as ordinary income.
You can sell assets in taxable accounts and choose whether you sell assets with long-term capital gains, short-term capital gains, or losses.
You can take tax-free income from Roth IRAs and 401(k)s to round out your income.
With tax diversification and tax bracket management, many people can stay in the 20% tax bracket for life.
And they can avoid or reduce the Stealth Taxes. That means no income taxes on their Social Security benefits and no Medicare Premium Surtax.
Most people don't have tax diversification, and they can't manage their tax brackets, because they have too much of their net worth in traditional IRAs and 401(k)s and not enough in Roth IRAs and 401(k)s.
They're setting themselves up for steep taxes later in retirement. One solution is to consider converting part of traditional retirement accounts into Roth accounts.
Pay Taxes Now to Reduce Retirement Taxes Later
I know. The oldest tax planning rule is "Don't pay a tax until you have to." In other words, maximize tax deferral.
That was a good rule in the past, but now it can be downright dangerous to your wealth.
You've seen how the "RMD Waterfall" generates substantial income tax as you age.
If you follow the classic advice and maximize tax deferral, then you're also going to maximize the flow from the "RMD Waterfall." That increases both income taxes and Stealth Taxes in retirement.
I've talked to too many people who were suffering through the "RMD Waterfall", anxious to escape the draining of their nest eggs. I've also talked to many other people who weren't in the "RMD Waterfall," but looked into the future and were frightened by its approach. You don't want to be in those situations.
Another consideration: Income taxes are likely to increase in the coming decades. So it doesn't make a lot of sense to defer income taxes today if tax rates are going to be higher when you withdraw the money from your IRA or other tax-deferred account.
There's also a problem with traditional IRAs and 401(k)s that many people overlook. All distributions from these accounts are taxed as ordinary income. That means they are taxed at your highest ordinary income tax rate.
Many of these accounts are invested in ways that would be tax-advantaged in a taxable account. They earn long-term capital gains and qualified dividends that are currently taxed at a maximum 20% rate, and at a 0% rate for people in some tax brackets.
By investing through a traditional IRA, you're converting tax-advantaged capital gains and dividends into highly-taxed ordinary income.
The difference in those tax rates really adds up over a lifetime.
When I first realized this situation many years ago, I recommended that some people consider emptying their IRAs early instead of maximizing deferral.
I didn't base this advice on some intuition or estimate. I created spreadsheets that compared the after-tax results under different scenarios.
Most advisors didn't do that. They relied on intuition or age-old rules of thumb.
I crunched the numbers and gave my readers details of the circumstances in which it made sense to take all or some money out of an IRA early, and when it didn't. I even made a spreadsheet available to my readers on the website, so they could customize the calculations to their own situations.
Today, anyone over age 45 has to think seriously about paying taxes on their IRA now, instead of risking their portfolios to higher taxes in the future.
In some cases, it just doesn't make sense to pay taxes later... not when your IRA will be slapped with the largest jaw-dropping tax bill you'll ever pay at some point in the future.
You'd think that would be a no-brainer. Yet many planners stubbornly cling to the tax deferral rule even if it's not in your best interest!
As I've been telling Retirement Watch readers, you may want to consider paying your IRA tax bill now rather than later. That's because you could substantially lower your tax bill in retirement by doing so.
In fact, you could avoid paying tens of thousands of dollars in needless taxes!
Fortunately, you don't have to simply empty your IRA early, pay the taxes, and put the after-tax amount in a taxable account. You have many other options available.
Avoid the IRS' Wrath with a Roth IRA
One of the most powerful tax-saving retirement weapons that should be in every retiree's arsenal is the Roth IRA. Its unique benefits are tremendous! No age limit on contributions. No required minimum distributions after age 70½.
And the best reason ever to open a Roth IRA: not one dime you withdraw from it in retirement is ever taxed. No matter how much your money has grown over the years!
Let's say you contribute $25,000 to a Roth IRA. After 20 years of wise investing, your Roth IRA has grown to $125,000. You start withdrawing the money to take a once-in-a-lifetime vacation... indulge in a new set of golf clubs... buy your dream convertible... or just pay the bills.
Not one dime of your withdrawal is taxed!
Not everyone can open a Roth IRA, because contributions aren't allowed if your AGI is above $184,000 for married couples or $117,000 for singles.
But anyone can convert a traditional IRA into a Roth IRA. Or a traditional 401(k) to a Roth 401(k) when their employers offer the Roth version.
Of course, there's a cost to converting to a Roth IRA. You have to include the converted amount in gross income and treat it as though it were distributed to you.
You'll be breaking that oldest rule in tax planning by paying taxes before you need to. That's why many people don't convert their traditional retirement accounts to Roths.
But, as I've shown you, for many people, it makes sense to convert and pay those taxes now. By converting, you're generating a stream of tax-free lifetime income, and you can pass that tax-free income to your heirs.
I don't expect my readers to rely on general observations or rules of thumb dictating when to convert. That's why I've made detailed analyses of different conversion scenarios. I told my readers the important factors to consider, when it made sense to convert, and when it didn't.
I've also explored the different strategies for converting your IRAs, so that my readers know how to maximize the benefits of a conversion. In some cases, these strategies can make a conversion a winning strategy when it otherwise wouldn't be.
You'll learn many of these strategies in the Special Report I mentioned earlier -- The New Rules of Retirement -- which is FREE to Retirement Watch members.
I'll show you how to protect the bulk of your IRA conversion from taxes. Your accountant or broker may not know these simple, 100% legal secrets that can cut your conversion tax bill to the bone, but Retirement Watch members know them.
Here's a sample of what you can expect to learn about these new rules from Retirement Watch.
The 6 critical factors that determine whether it makes sense for you to convert a traditional IRA to a Roth IRA this year.
Why converting your IRA is not an all-or-nothing decision and how becoming a "serial converter" can boost the benefits of conversion.
How converting can save you from taking an RMD, and why so many people get this wrong.
Why it often boosts your after-tax wealth NOT to convert a traditional IRA into a Roth.
Roth IRAs aren't only for the young. Don't believe the rule-of-thumb that you might be "too old" for a Roth IRA.
Converting to a Roth IRA is only one way to avoid the "RMD Waterfall" and other pitfalls of the traditional IRA.
I've shown my readers other strategies. Some of these strategies generate guaranteed, tax-free wealth for loved ones. You don't have to worry about future taxes, low investment returns, mistakes in calculating RMDs, or other traps.
These strategies aren't for everyone. And that's one of the features of Retirement Watch that my readers appreciate...
I don't hype strategies and investments. I explain them clearly and in detail. Then, I tell readers when a strategy should be considered and when it shouldn't.
I don't believe in one-strategy-fits-all financial advice. You maintain financial independence by considering all the options and choosing those that are best for your circumstances. That's what I help my readers do.
Here's a sample of strategies I have already revealed to my readers and that you'll learn after you become a Retirement Watch member:
How your traditional IRA can become a Family Bank that guarantees your loved ones will inherit today's IRA balance, and perhaps more, tax-free.
When it might be better to turn your IRA into a Family Dynasty Trust that can provide tax-free cash to your family for years.
When it makes sense to make your charitable gifts through an IRA, and how writing checks to charity costs you and your heirs thousands of dollars.
How to keep your IRA pumping out cash for years -- even if you're over 70 -- in spite of having to take RMDs.
The 4 easy steps to converting IRAs -- or part of one -- into a Roth IRA.
How to take your RMD without liquidating a single share of stock in your IRA, and rack up thousands in tax-free dollars.
When it makes sense to convert it to a Roth IRA -- and when it doesn't.
You'll learn many of these strategies in your FREE Special Report, The New Rules of Retirement -- along with many others -- as a member of Retirement Watch.
Get the full scoop on these and other little-known tax-saving strategies. Learn which strategy will work for you.
Remember, every dollar you withdraw from a Roth IRA is tax-free when you retire. And shielding your retirement nest egg from rising taxes will be an increasingly important strategy in the years ahead.
That's why it makes sense to pay LESS taxes today... rather than MORE taxes tomorrow... plus pay NO taxes at all on future capital gains and interest!
That's the kind of financial freedom revealed in your free report, The New Rules of Retirement.
But that's not all you get as a Retirement Watch member. You'll also learn how to maximize the effectiveness of...
"Stretch IRAs" -- How to Create a Secure Income Stream for Generations
The goal of most people is to make their IRAs last as long as possible.
They want their IRAs to remain robust for at least their lifetime, and many people want to leave substantial IRA balances for their children. They hope their children continue to enjoy the tax deferral of the IRAs until it is needed for important spending needs, perhaps their own retirement.
These types of plans are known as "Stretch IRAs." You manage the IRA and use the tax law to make the IRA last as long as possible.
The politicians in Washington don't like the Stretch IRA. They've been waging war on it for years... soon, the Stretch IRA could disappear.
That would require all IRAs to be fully distributed within five years after the original owner's death.
Worse, Congress could change the Stretch IRA rules at any time... without committee hearings, warnings, or public discussions. They can change the rules almost overnight.
In Retirement Watch, I describe many strategies for increasing the after-tax value of your IRAs. I've shown my readers strategies that will let their IRA wealth last for decades, even if the Stretch IRA is repealed.
You've learned the basics of building an impenetrable fortress of retirement wealth with your IRAs. You know the main potholes to avoid and the strategies you can take to increase your nest egg.
But you need to know more. You want your IRA to last your lifetime and, hopefully, beyond. You'd like the IRA wealth to be available to your children -- perhaps even grandchildren, and your heirs, for generations.
And, of course, you want to avoid the "RMD Waterfall," the war on Stretch IRAs and the innocent actions that can trigger taxes or penalties. You want to reduce the mortgage on your IRA.
So, let's review the most important strategies that will preserve the value of your IRA, reduce taxes, and increase the after-tax wealth available to your loved ones.
Some are straightforward and simple -- anyone can use them.
Others are for people who have adequate sources outside their IRAs to fund retirement and view their IRAs primarily as something to be left for loved ones and charity, or tapped in an emergency.
Make Your IRA the Cornerstone of Your Estate Plan
How do you leave your IRA to your heirs and make sure the IRS doesn't steal the bulk of it in estate taxes?
In my research, I've discovered some of the biggest IRA mistakes are made in passing an IRA on to the next generation.
Heirs routinely lose a large percentage of inherited IRAs to unnecessary taxes, or they unknowingly trigger income taxes prematurely.
The rules are simple... but they aren't obvious. Most heirs don't know them or even know to ask about them.
For example, the #1 mistake heirs make is to change the title of an inherited IRA so it is in their own names. But if they're hoping to continue the tax deferral, this simple name change triggers a rapid distribution of all the IRA's assets.
This means your heirs could get whacked with an enormous tax bill... and have to fork over as much as 39.5% of their inherited IRA in income taxes to the IRS shortly after they inherit it!
To prevent this tax tsunami from swallowing up your wealth, it's very important to tell your heirs about 3 simple title changes they need to make to keep an inherited IRA safe from the greedy clutches of the IRS...
Keep the name of the owner who passed away
Make sure the word "IRA" is used
State the IRA is "for the benefit of" the heir
So, an appropriate title for an inherited IRA would be, "John Sample IRA (deceased), F/B/O Jim Sample, beneficiary."
These three simple title changes can provide ironclad protection and the ultimate flexibility for your heirs.
Now, your heirs can take distributions when they want to, NOT when the IRS decides. That means they can stretch out their IRA distributions over a longer time horizon, taking the money and paying the taxes on their schedules.
In your FREE Special Report, The New Rules of Retirement, I explain other simple ways your heirs can avoid paying needless taxes on an inherited IRA so your legacy lasts a lifetime.
For example, I reveal a common trap that could force your heirs to pay even higher taxes -- and penalties. It's an often overlooked deadline you'll want to make sure your intended heir(s) know about now -- not after it's too late!
Perhaps the biggest mistakes in estate planning these days are made with IRAs and other retirement plans. Did you know that your IRA isn't covered by your will?
Retirement Watch readers know that and more, such as...
Why a Roth IRA can be an excellent estate planning vehicle.
HOW the beneficiary designation form can result in lost wealth, and 4 simple steps to ensure your custodian carries out your instructions.
The one beneficiary you can name who never pays a single dime in distribution taxes. Bonus: Big tax savings for you, too.
Two entities you should never name as IRA beneficiaries. You're just handing your money over to the IRS if you do!
In fact, to help make sure all of your intentions for your estate are crystal clear to your IRA custodian, attorney, executor, family members or anyone else, I'd like to send you another FREE Special Report.
It's called Your 20-Minute Estate Plan: Building a Lasting Legacy.
It's true that most people don't have to worry about federal estate taxes any more.
That doesn't mean you don't have to worry about estate planning. It means your estate plan can focus on the things that really matter. You see, despite what many people believe, estate planning is about more than taxes.
Thinking that estate planning is all about taxes, and that you no longer have an estate planning problem, would be a mistake -- a colossal mistake that can cost you and your loved ones a bundle and create a lot of headaches.
Estate planning is about seeing that your hard-earned wealth goes to those you want to have it, and in the most efficient way possible.
It involves reducing family conflicts and reducing waste from high expenses, delays, probate, mismanagement, creditor claims, and more. You're exposed to all of these risks even if you don't owe a dime in federal estate taxes.
That's why I include estate planning strategies in almost every issue of Retirement Watch. And why I give members my FREE Special Report: Your 20-Minute Estate Plan: Building a Lasting Legacy.
This easy-to-understand report strips away any confusion you may have about estate planning.
I've made it so simple that, after reading this report, you'll be able to develop an effective plan with an estate planner quickly and efficiently... while reducing how much it costs you.
The estate planning advice you get as a Retirement Watch member is based on my research and real-world experience, such as:
Why standard provisions in your will could cost your estate thousands or leave your spouse impoverished.
Why it doesn't make sense to make charitable gifts from your estate.
Why the bypass trust remains valuable to estate plans even today.
Why the family home or vacation home often is the most difficult asset in an estate, and 5 ways you can solve this problem.
Why "digital assets" need to be a key part of your plan.
Why joint ownership is often a bad idea in an estate plan.
Shrewd ways to have your business pay estate taxes.
When to use trusts in your estate plan, and how to pick the one.
How to avoid probate, and why you want to.
By joining Retirement Watch now, you'll receive all of the above -- and more -- in each monthly issue, and in your free report, The 20-Minute Estate Plan.
After reading this report, you'll have a good idea of what your estate plan should be. And you'll be able to sit down with an estate planner to intelligently and economically put together the right estate plan for you.
You'll save time, money, frustration, and end up with a superior estate plan.
I'm going to move on from estate planning and let you in on a little secret -- a secret that your broker, accountant or financial planner will NEVER tell you about. It practically guarantees you'll plan a retirement free from money worries.
How to Beat the Threats to Lifetime Income Security
You know that retirement security in America is at risk. Numerous trends and forces are in place that threaten the financial security of retirees and those planning for retirement.
I've already discussed in general the rising tax burden on retirees and in detail the taxes, penalties, and other factors that can reduce the after-tax value of IRAs.
I've shared strategies that can help you increase the after-tax value of your IRAs, but there are many other factors you need to be aware of:
Social Security and Medicare have solvency problems. Both programs now are means-tested (higher income beneficiaries have higher costs or lower benefits or both). There's more of that to come.
You're on your own for medical care. Few employers offer retiree medical benefits, and Medicare covers only about half of medical expenses -- one of the largest expenses for retirees, which will only increase in the future.
Retirement lasts longer than most people realize. Twenty- and thirty-year retirements aren't unusual, and most financial planners say a married couple should plan for at least one spouse living into their 90s.
Most retirement investment advice is wrong. Investments have changed (0% interest rates, frequent bear markets, lower long-term returns, etc.), but most retirement investment advice hasn't.
Retirement costs more than most people think. Forget the rule of thumb that you'll spend 80% of pre-retirement income in retirement. That doesn't work for most people. And don't forget about inflation -- even 2% hurts.
You don't have to stand there meekly and let these risks destroy your nest egg. You can fight and win.
I know. I identified the threats a long time ago and have helped tens of thousands of investors just like you overcome them and establish lifetime financial security.
Now you too can build a fortress around your assets and generate reliable cash flow.
I believe today is a great opportunity for those who prepare and adapt.
Through solid, independent research and advice, I discovered the critical strategies needed to establish and maintain financial security.
However, I'm not offering a magic formula, silver bullet, or single ideal investment. You won't see me talking about some obscure or secret government plan and promise it will make these obstacles go away.
I'm not telling you there's an investment vehicle that was created by a law that was known only by a few insiders until now. You'll have to look elsewhere for such gimmicks and fads.
I offer a toolbox of strategies and a solid plan that will help create the retirement you desire. And I urge you to ignore the status quo, conventional rules of thumb, and standard Wall Street advice.
My plan isn't complicated, either. I find that simple solutions often are the best.
Through relentless, detailed, independent research, I push past the complexity so beloved by Wall Street and Washington, and guide my readers to strategies that will maximize their cash flow.
My plan is also comprehensive.
I help readers make the right moves on tough issues involving all the financial aspects of retirement planning: their investments, Social Security, managing IRAs, pension plans, annuities, estate planning, medical coverage, income taxes, and more.
Most importantly, I've learned, and my readers know, a retirement plan is a process, not an event.
As you've seen, the rules and circumstances keep changing. You can't set-it-and-forget-it.
For more than 25 years, I've kept my readers a step or two ahead of those changes, exploded myths, and steered them down the road to financial security.
I write the only publication devoted to all the financial aspects of retirement. Most "retirement" publications focus on finding the highest yields, hot investment tips, the best places to retire, or a few other topics.
That's not for us. To have a successful retirement, you need to fit together all the pieces of the puzzle.
Let me keep you on the road to retirement security, explode some retirement myths, and explain today's New Rules of Retirement.
Think about my suggestions for improving your retirement. Take notes. Review my ideas. Then, consider my invitation to join our growing family of Retirement Watch members.
Now is the best time to begin your membership.
What is Peace of Mind Worth to You?
So what's it worth to you to have a worry-free retirement?
To know that you have the best possible strategies in place to reduce taxes, make your wealth last longer, and pass more of it onto your heirs?
Thousands of dollars, probably. Perhaps even tens or hundreds of thousands, depending on which planners and advisors you go to.
But there's no way you can go at it alone, mainly because what you don't know about retirement can hurt you...
There's an old saying, "Failure to plan is planning to fail."
Nothing could be truer when it comes to your retirement. If you don't take steps now to protect and grow your wealth...
There are plenty of others out there who know what to do with your money... like Congress, the IRS, and local or state governments.
That's why I created Retirement Watch -- to give you the very best advice in retirement financial planning.
Each month of Retirement Watch will bring you my latest research and insights on a range of retirement issues.
Without trying to toot my own horn, I'm confident you won't find another resource that does the kind of research I do... Or brings you the unique insights and strategies you'll find... Or covers the wide range of financial issues you'll read about every month in Retirement Watch.
Today, I'm inviting you to become a part of our Retirement Watch family of members. Once you do, you'll get the 3 FREE special reports I've already told you about:
The Little Black Book of IRA Secrets
The New Rules of Retirement
Your 20-Minute Estate Plan: Building a Lasting Legacy
And you'll immediately become eligible to receive all of the regular benefits of membership:
12 Monthly Issues of Retirement Watch -- Delivered directly to your email inbox every month (or mailbox, if you like)
Retirement Watch Hotline -- Every week
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