| Clint Eastwood playing "Dirty Harry" warns, "A man's | | | | managers or product experts who have given |
| got to know his limitations." This advice is particularly | | | | excellent investment advice to hundreds of their clients. |
| appropriate for financial planners and advisors who are | | | | Where they failed, however, is not taking the time to |
| giving advice beyond their expertise. Though I am | | | | become educated about IRAs and retirement plans or |
| biased because I have over 27 years of technical | | | | not seeking any additional help when they were |
| expertise in the IRA and retirement plan area, the lack | | | | confronted with issues related to IRAs and retirement |
| of knowledge in this area can cost clients hundreds of | | | | plans. |
| thousands or even millions of dollars. | | | | It also grieves me to say that these types of mistakes |
| I have seen financial planners without an adequate | | | | are all too common and that terrible advice regarding |
| background in IRAs and retirement plans, acting | | | | IRAs and retirement plans is routinely provided to |
| without advice from counsel or even advice from | | | | millions of clients. |
| other experts in the financial planning area, make | | | | Avoid These Costly IRA & Retirement Planning |
| enormously costly mistakes. That is costly to the | | | | Mistakes Do Your Research |
| clients, not the advisor. | | | | If you are an advisor reading this, my suggestion, would |
| IRA & Retirement Planning Mistakes That Can | | | | be to read, study and attend some good seminars that |
| Accelerate Acceleration of Income Taxes and Can | | | | will bring you up to speed on IRAs, Roth IRAs, and |
| Cost You Up to a Million Dollars or More! | | | | other retirement planswith good information you can |
| For example one advisor had both a father and son | | | | really add value for your clients. Excellent sources for |
| as clients. The father died leaving his IRA to his son. | | | | information include books by Seymour Goldberg, Ed |
| The advisor promptly transferred the IRA from the | | | | Slott, Robert Keebler, Natalie Choate, Gregory |
| father's name to the son's name? Sounds o.k. to you? | | | | Kolojeski, and of course my own book Retire Secure!. |
| But it isn't o.k. If you transfer an inherited IRA to a | | | | If you are a client looking for an advisor and you have |
| non-spouse beneficiary without a special designation | | | | a significant IRA, I would suggest that you learn |
| like "inherited IRA of Dad for the benefit of Son" you | | | | something about IRAs by reading a book by one of |
| cause immediate income tax acceleration for the IRA | | | | the authors mentioned above or conducting some |
| beneficiary. So rather than having the ability to stretch | | | | other research. At a minimum, ask an advisor what |
| an IRA or defer taxes for forty years, the son had to | | | | expertise they have in IRAs and retirement plans. If the |
| pay the taxes on the entire IRA distribution the year | | | | advisor's answer is, "What do you want to know?" I |
| after his father died. Using reasonable assumptions, this | | | | would repeat the question, "What expertise do you |
| mistake cost the son one million dollars over his lifetime. | | | | have in IRAs and retirement plans?" If they provide |
| Another time, a 55 year old retires from his company | | | | some vague information, ask them what books they |
| with a million dollars in a retirement plan. The advisor | | | | have read, seminars they have attended, or can they |
| recommends using an IRC Code 72(t) election for the | | | | show you any credentials that would certify their |
| entire million dollars. Only a fraction of that money was | | | | expertise in the IRA or retirement planning area. |
| needed for cash flow between ages 55 and 59. The | | | | Lack of expertise in the IRA and retirement plan area |
| result of the faulty advice was unnecessary massive | | | | could, in many cases, be of more consequence than |
| acceleration of income taxes between ages 55 and | | | | an advisor's ability to pick the appropriate investments. |
| 59. The appropriate response would have been to | | | | Expert advice is particularly important during life's |
| make an IRC 72(t) election for part of the IRA, not all | | | | significant transitions such as retirement and planning |
| of it. | | | | for your estate. Incidentally, important transitions are |
| Neither of these advisors is a bad person. As far as I | | | | also a great time to have money transferred to a new |
| know they might be wonderful spouses and loving | | | | money manager, one who hopefully is competent with |
| parents. In fact, they could even be excellent money | | | | IRA and retirement plan issues. |