Common IRA & Retirement Plan Investing Mistakes

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Avoiding Common IRA & Retirement Plan Investing Mistakes

Powerpoint slides on a superior retirement planning strategy called Roth IRA on Roids which allows for tax-free distributions, tax-free growth, guaranteed principal and guarateed death benefits.It is common for IRA retirement account owners to feel that they are in over their heads. Simple IRA limits and rules can be complex and intimidating. The rules regarding the contribution limits, when and how distributions are made, and who is allowed to be a beneficiary of the account are all things that can confuse people. The following article will help identify and avoid the common mistakes many IRA account owners have.

Stretching IRA the Incorrect Way

To provide an example, let's say you have been making contributions to your IRA for several years and have been consistently earning between 6% and 8% per year in mutual funds. When you reach 70 ½ years of age, you decide to take the IRS-required Minimum Required Distributions at about 4% per year. Even while receiving distributions, the account is still invested and will continue to grow.

Upon your death, you leave the remaining amount in the account; say $250,000, to your child, who is 42 years of age. With your IRA account earning 6% each year, the account will generate approximately $1,250,000 during the remainder of your child's life. If the amount in the IRA were $500,000, IRA & retirement plan investing would generate $2,500,000, depending on current IRA CD rates of return, IRA interest rates, and other investment compounding. This all sounds great, right?

Unfortunately, many heirs that inherit an IRA retirement account become greedy and can be short-sighted. They choose, not fully realizing the implications, to close out the account and pay a lot of money in taxes, which could have been avoided. They have chosen to take the money and purchase a new car, boat, house, or other irrational item because they feel the money came out of nowhere – like winning the lottery - and it is their right to spend it, instead of realizing that it represents a lifelong reserve that you worked hard to attain over 40-50 years, letting the money in the account continue to grow and work for them.

Yet another risk is that of your child's spouse. Do you really want to risk your in-law getting the money you worked hard to save and put away through good times and bad for the last 50 years? If your child gets a divorce, the outcome is even worse – they will get half of everything you saved.

Using an Ultra Trust™ can help avoid these unnecessary scenarios from ever happening. With this trust, you will be able to specify exactly how and when your heirs will receive payment. You will also be able to protect the money in the account from bad choices made by your beneficiary.

Tax Consequences of IRA Retirement Account Left to Spouse

Often times, an IRA retirement account is left to the surviving spouse. This is a common event and it does provide that spouse with some financial stability later in life. However, most people do not consider the tax consequences involved.

Despite the current unlimited marital deduction for saving estate taxes now, if your spouse dies, there are considerable taxes imposed. If you and your spouse combine to have a taxable estate of over one million dollars after the year 2011, your beneficiaries will be looking at a huge tax liability.

Also, if the surviving spouse decides to leave the IRA and the remaining money to your children or other family members, there can be many tax liabilities involved. If the beneficiaries opt to withdraw the funds, they will then have to pay the taxes and place the money into another account, usually a joint account with their current spouse. The entire inheritance very well could be taken in the event of a divorce or lawsuit.

All of these mistakes that are made regarding IRA retirement accounts can be avoided by using an Ultra Trust™.

To learn more about how to avoid these types of problems including the transferring of your IRA to heirs and more about the Ultra Trust, please go to: Estate Planning-Independent Retirement Account

To learn more about IRA's go here: IRA Death, IRD, Stretch IRA

Rocco Beatrice, CPA, MST (Master of Science in Taxation), MBA (Master of Business Administration), BSBA (Management/Accounting), CWPP (Certified Wealth Preservation Planner), CMMB (Certified Mortgage Broker), CAPP (Certified Asset Protection Planner), Managing Director, Estate Street Partners, LLC. Mr. Beatrice is an asset protection, award-winning trust, estate planning and tax expert.

If you are seeking for the best return on your IRA and Roth IRA investments while reducing your taxes then call us now for your initial, completely FREE, no obligation, no sales pressure, 100% total & complete client privacy consultation. Call us toll-free now at 888-93-ULTRA (888-938-5872)!

Estate Street Partners, LLC
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