Grow Your Retirement Accounts as Traditional Pensions Decline
In the last 20 years, the number of people with traditional pensions from employers has been cut in half, and the assets held in 401(k), IRA, and other personal retirement accounts have more than quadrupled.
As a result, the current generation of workers preparing for and entering retirement may hold a large portion of their net worth in personal retirement accounts.
These retirement accounts offer a valuable benefit: tax-deferred growth of the account assets until withdrawals are made.
Keep Your Beneficiaries Current
The tax-deferred growth benefit of your retirement accounts can be passed along to your spouse, children, or others, as long as you have named them as beneficiaries on your accounts.
If your list of beneficiaries is not up to date, or your accounts are left to your estate, this can trigger an IRS requirement that the entire balance of the retirement accounts must be withdrawn within five years after inheritance and taxed as ordinary income.
This highlights the importance of updating your beneficiary designations on these accounts when you are reviewing your will and other estate planning documents.
Protect Your Assets Through a Stand-Alone Retirement Trust
Another way to leave retirement accounts to beneficiaries is through a stand-alone retirement trust. This type of trust enables the original account owner to set guidelines for how their beneficiaries may use the account assets—for education costs, purchasing a home, or for their own retirement.
Best of all, the trust preserves the tax-deferred growth of the account balances over the course of the beneficiaries’ lifetimes.
This is especially important when your priority is to protect these assets from your beneficiaries’ creditors, predators, or their own poor spending decisions.
Brooks Mackintosh, Certified Estate PlannerTM, is an attorney at Mackintosh Law, LLC, in Decatur.
For more information, visit Mackintosh.Law, or call 404.793.2510.