A Point-by-Point Summary of the Whole Retirement & Estate Planning Process
by James Lange, CPA/Attorney
If you are still working, please:
- Contribute at least the amount to your retirement plan that your employer is willing to match or partially match.
- If you can afford to, contribute the maximum allowed to your retirement plan even if your employer does not match.
- Once you have maximized contributions to your plan at work, contribute the maximum you can to an IRA, even if you cannot take a tax deduction for it.
- Consider your personal tax bracket when trying to decide if you should contribute to a Roth or a traditional IRA/retirement plan.
- Do not take loans against your retirement plan. Allow the tax-deferred or tax-free status of the account to maximize the growth of your money.
- If you don’t need the income, don’t take distributions from your retirement plan until you are required to.
At retirement, when you need money:
- Understand the advantages and disadvantages of moving your old company retirement plan. If you do move it, consider using a trustee-to-trustee transfer to move it to an IRA or a one-person 401(k).
- Look for opportunities to make tax-free transfers of after-tax contributions to a Roth IRA.
- If you have company stock in your retirement plan, look for opportunities to transfer it while avoiding capital gains tax on the appreciation.
- When you need to spend money, spend non-retirement assets (money you already paid income tax on) first.
- When your after-tax assets run down, spend your traditional retirement plans and Roth plans strategically, to minimize the impact the withdrawals will have on your income taxes.
- Plan for needed or Required Minimum Distributions from retirement plans during your lifetime.
- Keep distributions from retirement plans to a minimum.
- If you don’t need the income from the minimum distributions, consider improving your tax situation by directing that all or part of the distribution be sent to a qualified charity.
- Take advantage of the years after you retire, but before you are required to take minimum distributions, to convert some of your traditional retirement assets to Roth accounts.
- Consider using annuities if you want a guaranteed lifetime income.
When planning for your heirs:
- If you have not had your wills and/or trusts reviewed in the past five years, do so as soon as possible. Changes in the laws have made many older documents obsolete.
- These legislative changes also make it necessary that you review your beneficiary designations.
- Make your estate plan as flexible as possible by incorporating the use of disclaimers.
- Consider implementing a formal gifting strategy to benefit your children, grandchildren and favorite charities.