Reap Rewards from Retirement Planning
The retirement years for our parents were provided with a greater sense of security from years of service with the same employer, who promised defined pension benefits. Today, no such corporate commitments exists, you must be responsible for your own retirement plans. Many investors have multiple orphaned 401(k) balances from previous employment which should be consolidated to better manage their retirement accounts to meet their retirement needs. Non-qualified retirement accounts, such as annuities have tax deferral similar to qualified accounts with differences in taxation, contribution limits and eligibility requirements to name a few. A major advantage qualified retirement plans have compared to non-qualified retirement plans is the tax deductibility of contributions. In most instances, a True North Financial Advisor would recommend that a client invest the maximum limits into a qualified retirement plan before non-qualified investments are made. Depending on your eligibility, these are some of the qualified retirement plans:
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The tax code has rules which govern the taxation of withdrawals from qualified and non-qualified retirement plans. Distributions before age 591/2 may be subject to a 10% early withdrawal penalty, unless you comply with certain provisions. If required minimum distributions are not made beginning at age 701/2 any shortfall is subject to a 50% penalty. According to IRS life expectancy tables, you can “stretch out” the required minimum distribution amounts over multiple generations to enable your heirs to defer taxation on significant sums, until they reach age 591/2. A True North Financial Advisor can help avoid penalties, plan withdrawals and help pass on any inherited IRA balances on a tax advantage basis.
