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Common IRA mistakes

Planning for Tomorrow

Posted: August 25, 2008 6:52 p.m.
Updated: October 27, 2008 5:01 a.m.
You have worked hard all your life to build your retirement assets. And, you want those assets to work hard for you throughout your working career and your retirement years, and then for your family and heirs after that. IRAs are wonderful products, with lots of benefits and flexibility, but those benefits come with certain rules and regulations you need to keep in mind.

Following are some common mistakes that people make with their IRAs and how to avoid them:

n Failing to complete an indirect rollover within 60 days. An individual only has 60 days to reinvest the funds, including amounts withheld for tax purposes, or risk losing the tax-deferred status of the investments.

n Spousal continuation mistakes. Some missed planning opportunities may occur where the rollover or spousal continuation is accomplished without first considering all possible options. While the surviving spouse has the option of treating his or her late spouse's IRA as their own, or rolling the IRA assets into a personal IRA, the person may not wish to do so in every case.

n Failing to name a beneficiary. A lack of a named beneficiary can require distributions from the IRA, loss of the stretch capability and can result in probate.

The beneficiary mistake has been addressed in previous articles. Whatever happens, don't make this mistake! When an IRA owner fails to name a beneficiary, unlike other property, IRAs do not pass by a will; rather, they pass according to the terms of the IRA's beneficiary designation form.

Accordingly, the IRA beneficiary designation form could be one of your most important estate planning documents, but it is often overlooked or neglected. Review these issues periodically with your financial advisor, especially after you have made life changing decisions, such as a divorce or passing of a named beneficiary.

Jim Lentini, CLU, ChFC, IAR is president of Lentini Insurance & Investment, located in Santa Clarita. His column represents his own views and not necessarily those of The Signal.


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