Tax Tip of the Week
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Fax: 856.667.3652
Get the most mileage out of your retirement plan assets
For the week of
July 9, 2001
The IRS announced new rules for retirement plans this year. Under the proposed rules, you can change your beneficiaries even after you've begun taking required distributions from your plan. In fact, beneficiaries can be changed even after you die.
When your beneficiary must begin taking distributions from the IRA he or she inherited, the required minimum distribution is calculated on that beneficiary's life expectancy. With proper planning, distributions can be extended over several decades.
That gives you (and your heirs) the opportunity to spread out the payments over a longer period of time. Letting money accumulate inside a tax-deferred retirement fund allows it to grow faster than it would in an identical taxable investment outside the fund.
Example.
Let's say you purchase two $10,000 corporate bonds, each bearing 10% interest; one inside your IRA and the other
outside your IRA. Let's compare the results in each fund assuming you and your heirs are each in the 28% income
tax bracket.
|
IRA |
Taxable |
Difference |
|
|
|
|
|
|
| 5 years |
$ 16,105 |
$ 14,157 |
$ 1,948 |
| 10 years |
$ 25,937 |
$ 20,042 |
$ 5,895 |
| 15 years |
$ 41,772 |
$ 28,374 |
$ 13,398 |
| 20 years |
$ 67,275 |
$ 40,169 |
$ 27,106 |
| 40 years |
$ 452,593 |
$ 161,358 |
$ 291,235 |
Give us a call to review your beneficiary designations and how they fit into your overall estate and financial plans.
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without further details and/or professional assistance.
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