Your Complete Retirement Planning Road Map

Introduction
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THE LONG, HAPPY LIFE OF YOUR
RETIREMENT SAVINGS
 
“Lou was a daredevil. His last words were, ‘Watch this!’”
 
—Obituary featured in USA Today (June 22, 2006)
 
Planning for retirement is no place to be a daredevil, and yet most people are just that, even though they may not think of themselves as one. But anyone who spends a lifetime building up a retirement nest egg and does not take the time to check up on it once in a while to make sure all systems are go is indeed flying without a net and tempting fate.
 
Imagine getting in your car day after day without ever giving a thought to whether it’s got oil in the crankcase or needs a tune-up, without ever having a mechanic take a look under the hood or kick the tires—just to trust that it will always start, always get you where you want to go. You wouldn’t think of treating your car that way, and yet if a car breaks down, it can be fixed or replaced. You can call AAA and get it towed, or just leave it by the side of the road and walk away—as I once did years ago when my 1966 Mustang suddenly died on me at the Southern State Parkway tollbooth on Long Island. My dad had to come and pick me up, shaking his head at me in disbelief as my brother gave me his “what a moron” laugh. But, hey, what was the big deal? It was just a car.
 
The same cannot be said of your life savings. If that breaks down due to lack of proper care and maintenance, it would take another lifetime to replace—and nobody gets a second chance!
 
So, this book is for all you daredevils out there who seldom if ever look under the hood of your retirement savings, wherever your account (or accounts) may be housed: a 401(k) plan; a 403(b) plan (also known as a Tax Sheltered Annuity Plan) for employees of schools, hospitals, and tax-exempt organizations; a 457 plan (for governmental employees) or any other company-sponsored retirement plan; an Individual Retirement Account (IRA); a Roth IRA; or a self-employed retirement plan like a Keogh, SEP IRA (Simplified Employee Pension) or SIMPLE IRA (Savings Incentive Match Plan for Employees).
 
What Can Possibly Go Wrong?
 
Now that I am older and wiser, I do bring my car in for servicing, where the service department manager tells me that he gives it a proper checkup by putting it through a rigorous fifty-eight-point diagnostic using the latest computer technology. If pressed, I probably couldn’t come up with more than five things to look at under the hood of my car that might conceivably break down—and he listed fifty-eight!
 
It suddenly hit me that the same is true for retirement accounts, where many things can go kaput without careful monitoring. Most people just open an account, make contributions, maybe make some investment choices, and that’s about it until they retire and start collecting. But by then it’s too late to fix what may have gone wrong along the way—and believe me, bad, bad things can happen. For example, you could go broke and end up giving most of your retirement funds back to the government. Of course, going broke is not the end of the world. Lots of people go broke. That’s why it’s important to know how the prospect of having to declare bankruptcy will affect your retirement savings, tax-wise and otherwise. Remember, unless you’re in a Roth IRA, where you pay the tax on your contributions up front, your retirement account has yet to be taxed, so not all of the money you have saved all these years is really yours.
 
A healthy retirement account is always a function of a long period of disciplined saving and investing (unless you inherited it, which is an even better plan and a great shortcut!). You would hate to think that after twenty, thirty, or even forty years or more of diligent saving that you slipped up in the end by passing most of it on to Uncle Sam rather than your family. And that’s just one of the things that can go wrong!
 
So, I decided that a process for giving retirement accounts a regular, thorough look under the hood and kick of the tires, a checkup with the same rigorous precision of an automotive diagnostic, was needed. A system that would ensure no moving parts were overlooked—and thus keep retirement account owners, their beneficiaries and families from being financial daredevils.
 
Your Complete Retirement Planning Road Map is that system. There are many, many things relating to retirement accounts that demand regular attention and monitoring in order to make sure nothing goes off track. How many can you come up with—without looking at the Contents page, that is? This book looks at more than 250 of them—and, most important, shows you how to keep proper tabs on those potential problem areas and tune things up BEFORE they become an issue!
 
Customized Care for Your Retirement Savings
 
So, this book is for anyone who is serious about protecting, preserving, and passing the balance (if any) in their retirement account to their heirs no matter where they are in the planning process.
 
For example, you might just be starting to save for retirement in a 401(k) plan at work—in which case, this system of looking under the hood is the perfect way to develop good habits early, from the time you put your first dollar into that 401(k). On the other hand, perhaps you have just retired and moved your retirement savings to an IRA. Or, you might be anywhere in between those two points. Wherever you are in the process of saving for your retirement years, you’ll be able to use this system to make sure your money is well protected against the most common and costly retirement planning mistakes, and that you won’t miss out on any of the many tax breaks you can capitalize on to increase your savings for yourself and your loved ones.
 
For the first time, you will be assured that you will have done all you can to make the most of your retirement earnings or inherited account, using every possible tax benefit available to leverage exponentially that nest egg into a lifetime of financial peace of mind.
 
You will then be able to share this information with your family, and boastfully say, “Watch this,” with the confidence of knowing that you’re not going to go splat.
 
 
How to Use This Book
 
My care solution for looking under the hood of your retirement savings consists of five conveniently organized, easy-to-use sections, each made up of a series of checklists relevant to the issues covered in that section. Together, these five sections will address all of the most common retirement savings issues, including many special issues, that most of you will face at some point either as a retirement account owner, account beneficiary, or both. I have purposely excluded, however, some of the more obscure tax issues because this book is intended to be a user-friendly guide for most Americans to keeping their retirement accounts healthy, not an overwhelming and intimidating exploration of the tax code. If you believe you have a complex tax situation it is always a good idea to have a conversation with an experienced tax professional, and I would urge you to do so. The sections are as follows:
 
SECTION I: My Account Inventory
 
As I noted earlier, it is not uncommon these days for people to own and pass on multiple retirement accounts of different types—401(k), 403(b), IRA, and so on—to multiple beneficiaries. So, proper care of a retirement account or accounts begins here with knowing all there is to know about every account you’ve got and where that information is. Therefore, this section applies to every one of you using this book. It shows you how to survey and keep track of each originally owned account or inherited account now owned by you, then summarize that information for fast, easy reference as you move to the subsequent checklists pertinent to you.
 
SECTION II: The Account Owner’s Care Solution
 
This section addresses the key ownership issues specifically affecting all holders of an IRA, 401(k) or any other type of retirement account. Failure to address even one of these ownership issues all but guarantees that your account(s) will lose money at some point, either when you start taking distributions or when the money passes to your beneficiaries. Completing this section will give you what you need to avoid these ownership pitfalls. Keep your beneficiaries in the loop as you plan your decisions in this section. Remember, your beneficiaries will be stuck with those decisions. Inviting their input now will help to ensure a smooth transition down the road and a nest egg that can keep growing instead of losing substantial amounts to taxes.
 
SECTION III: The Account Beneficiary’s Care Solution
 
This section addresses the key issues affecting all inheritors of a retirement account or accounts. It is for any type of beneficiary—spouse, child, grandchild, other family member, friend, favorite charity, or a family trust. Here you or the inheriting entity will be given the tools to map out what you need to be attending to—and when—in order to take advantage of every available tax opportunity if the person you are inheriting from has not kept you in the loop. This section will also tip you off to key opportunities and pitfalls to avoid that you should make the account owner aware of (if not too late) in his or her planning because they will affect you. Once you have inherited and transferred title and ownership to inherited account(s), thereafter you are the account owner and will use Section II in planning opportunities for your own beneficiaries.
 
SECTION IV: The Special Issues Care Solution
 
This section shows how to address those unique issues that do not apply across the board to every retirement account owner or beneficiary, but may apply to one and/or the other of you (each checklist will tell you who) at some time. Here, you will see how to handle these stray issues, such as: accessing retirement funds early without incurring a tax penalty; taking advantage of company stock tax breaks; proper Roth IRA planning; making decisions in the event you or your beneficiary becomes incapacitated. This section is the most complete coverage of these special issues ever compiled for retirement account owners and beneficiaries. If you have a special issue that is not covered here, this means yours is a really, really special situation that you should address with a professional financial advisor right away.
 
SECTION V: The Follow-Up Care Solution
 
Whether you are the account owner or beneficiary of an inherited account, this section serves as your safety net, providing you with all the reminders each of you will need to check up and follow through on during the year (and by year-end) to keep your respective road maps current and your planning on track. This final section also shows how to make sure either as an owner or a beneficiary of the account(s) that your respective financial advisor or fund manager attends to every detail you have covered so that nothing goes awry on the management end in the implementation and maintenance phase of your planning. The checklists here will give you the peace of mind of knowing that your financial advisor has the proper expertise, as well as everything he or she needs from you, to do what you want done correctly—and if not, what to look for in finding one who does.