To Roth or Not to Roth?
New Century Planning is happy to work with clients of any age, but focuses on retirement account distribution planning and its implications, particularly through seminars on "Required Minimum Distributions (RMDs)" and income and legacy planning.
Here are some interesting and alarming facts on the RMD phenomenon:
- 78 million baby boomers
- Front end of the wave turned 70 in the summer of 2016
- A certain percentage have retirement accounts
- All will be subject to RMD rules and time frames**
- Increasing revenue stream to government for next 18 yrs!
- Will help keep Social Security and Medicare going
- Can affect your Social Security and Medicare premiums
- Can cause you to “run out of money” without proper planning!
- Can cause you to accidentally disinherit your intended beneficiaries!
- Different retirement accounts have different rules!!
As of July 1, 2016, the very front end of the roughly 78 million person baby boomer generation began to turn 70 1/2, and therefore face the strict rules and timeframes of the required minimum distribution process, which is applicable to all of their retirement account assets ( except Roth IRAs). New Century Planning believes that due to the confusing nature of the rules and regulations and time frames associated with the RMD process, and its implications for taxes, income needs, and legacy planning for the well to do retiree, a team of experienced and expert professionals who are well acquainted with the entire RMD process and its consequences, is critical for these retirees.
Unlike the vast majority of our competition, who still focus solely on the accumulation side of the retirement equation, New Century Planning Associates Inc. focuses on the often confusing and complicated retirement plan distribution rules and implications. Many retirees are surprised to learn that it is "easier" to work on the accumulation side of the retirement mountain, so to speak, over a 30-40 year period, than it is to navigate down the distribution side of the mountain. For example, did you know that withdrawals or distributions from all retirement plans* are taxed as ordinary income, and receive no favorable dividend or capital gains tax treatment, regardless of how long you may have help the investment?. Also, that these distributions can affect your income tax bracket, and the taxation of your Social Security benefits, and the amount you pay for Medicare premiums?
When you turn 70 ½, you must begin to take money out of your retirement accounts, whether you need it, or want it. These mandatory withdrawals are called "Required Minimum Distributions", or "RMDs." In addition to the above mentioned tax effects, RMDs can even lead to running out of money if proper planning is not done. Also, the penalties for making mistakes with your RMDs are severe, so it is advisable to consult professionals who specialize in this field.
Robert Ryerson is writing a book about the confusing issue of RMDs, with two colleagues-a CPA and a tax attorney-both of whom are also experts in the RMD arena. The book is due out in the next few months.
Properly planning for your retirement involves carefully reviewing your current situation, determining what you will need to live comfortably when you retire, and then putting a plan into place to meet your retirement goals. Our independence allows us to provide you with a wide range of choices and the objective guidance and discipline to help you meet your goals.
- Traditional IRAs
- Spousal IRAs
- Roth IRAs
- Supplemental Retirement Plans -
- Tax Sheltered Annuities
- Inherited or "beneficiary" IRAs
- Rollover IRAs
- tax deferred annuities
Our clients can choose from an extensive menu of retirement plans, from several major plan providers. After identifying the type of plan to best meet the company's needs, we review several different programs from various providers. This flexibility in plan selection can increase plan participation as well as employee satisfaction. Our semi-annual, on-site educational reviews also satisfy the employer's fiduciary requirements defined under the communications to employees rules in the IRS code (section 404C).
- 401(k) Plans
- Profit Sharing Plans
- Simplified Employee Pension Plans (SEP)
- Simple IRAs
- Money Purchase Pension Plans
- 403B Plans
** Only ROTH IRAs escape the RMD rules and timeframes and penalties, but inherited ROTH IRAs do not!