Beneficiary Designations...Do Your Family a Favor

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You’ve worked hard to build your retirement savings over your career with the expectation that you’ve been preparing for a long and comfortable retirement. Sadly, not everyone lives long enough to enjoy the fruits of these labors. While a healthy lifestyle may reduce your chances of passing prematurely, we all know that our life expectancy is unknowable. So what happens to your retirement savings if you don’t live long enough to spend them yourself? Simply put, they pass to your heirs and become available for them to spend. To whom these funds pass is determined in many cases by beneficiary designations.

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Use Caution Before Purchasing Real Estate in an IRA

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Purchasing an investment property with the funds in an IRA has gained popularity since the housing crash of 2008. At the time, prices were, and in some cases still are, attractively low. At the same time, many investors that had been laid off during the recession found themselves looking for ways to bring in income while coincidentally rolling 401(k) balances into IRAs. Others were still reeling from the stock market crash, and were leery of financial markets. As a result, they started turning to something the felt they better understood, real estate.

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Demystifying Required Minimum Distributions

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Tax preferenced retirement accounts, such as IRAs and employer sponsored 401(k)s, are extremely popular among Americans for many reasons such as tax benefits, creditor protections and access to financial markets. In fact, the tax benefits alone make these types of accounts one of the few gifts provided to us by the Federal tax code. Unfortunately, most of these accounts are also subject to Required Minimum Distribution (RMD) rules which require savers to transition from adding to their accounts to distributing from them once the saver turns 70.5 years old. These rules can be a bit complex for many retirees, but are incredibly important to understand and follow as the penalty for not fully adhering to the rules is steep; 50% of the amount not distributed.

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Be Careful with MLP Taxes, Especially In IRAs

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Master Limited Partnerships (MLPs) have grown in popularity in recent years due to their strong income yield, preferred tax treatment, the American energy production boom, and, more recently, a Trump administration friendly towards the energy sector. They also tend to have low correlations with most other asset classes, making them a strong diversifier when used within a properly allocated portfolio. Unfortunately, they also come with tricky tax treatment, especially when held in an IRA, making caution warranted.

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