Times Indicator – Effective Use of Your Retirement Plan or IRA

You’ve worked long and hard for years, saving diligently through your employer-sponsored retirement savings plan. Now, with retirement on the horizon, it’s time to begin thinking about how to tap your plan assets for income.

First, evaluate your needs. Estimate your non-negotiable basic needs for things like housing, food and medical care. This is how much you’ll need just to get by. Then, estimate your income needs for things like travel, leisure and entertainment to determine how much income you’ll need for your desired lifestyle. You can adjust the lifestyle items, if necessary, but conventional guidance says you’ll need at least 70 percent of your pre-retirement income in retirement.

Second, assess your predictable income. Determine how much you can expect from Social Security and traditional pensions. If your predictable income will be enough to cover your basic needs, you may be in a position to use your retirement savings to fund your lifestyle.

On the other hand, if your basic needs exceed your predictable income, think carefully about how you tap into your retirement savings.

For example, if you have both tax-deferred and tax-free (Roth) accounts, you might consider utilizing tax-deferred accounts first to maximize the tax-free growth potential of your Roth.

Third, understand your plan options. Upon leaving your employer, you typically have four options. Plans may allow you to leave the money alone or may require that you begin taking distributions upon reaching the plan’s normal retirement age. You may choose to withdraw the money as a lump sum or receive equal payments for life. You may roll the money into an IRA. Or, if you continue to work during retirement, you may be able to roll the money into your new employer’s plan. Be sure to compare fees and expenses for each option before making a decision!

Determining the appropriate way to tap your assets can be extremely challenging and should take into account a number of factors, including income taxes, other income-producing assets, your overall health, and your estate plan.

The good news is you don’t have to do it alone. Speak with an accountant, attorney or financial advisor today to learn more about your options.

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Retirement Plan FAQs

Retirement Planning can be tough, there are several factors consider. We thought we’d spend some time and answer some commonly asked questions…

1. I’ve worked hard for my money, how can H&S help me save for retirement?
2. I have never looked at setting up a retirement plan. What are my alternatives?
3. Are there any trip wires to taking retirement plan distributions?
4. I have a small company – how can I afford a large company 401k plan?

Click the image below to download our one-pager!

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Tax-Break for Charitable IRA Distributions Reinstated – But Act Fast for 2012


You can still make this type of contribution for 2012 as long as you do so before February 1, 2013.

Since 2006, taxpayers at least 70 ½ years of age have been able to make charitable contributions of as much as $100,000, directly from their retirement accounts, without having it affect their adjusted gross income.  There were a number of good tax-saving reasons that people took advantage of this law, but here is the kicker — it was supposed to expire at the end of 2011. Which means there was no reason for anyone to make such a contribution in 2012  – until it was reinstated as part of the American Tax Payer Relief Act in January 2013.

Well, that wouldn’t seem to help anybody, but this new legislation gives us a fleeting chance, here’s why:

  • You can still make this type of contribution for 2012 as long as you do so before February 1, 2013.
  • Also, if you waited until December to take distributions from your IRA, you can donate that money to charity before January 31, 2013 and receive the same treatment.
  • A word to the wise for 2013; you must do it the usual way – by asking the IRA custodian to send the distribution directly to the charity.   

Have additional Questions? Contact H&S Tax Professional Scott Hunt at 231.798.6508.

Scott Hunt
Certified Public Accountant