By Joel P. Bruckenstein
Two books you can’t do without.
Tax-advantaged retirement accounts are often one of the largest, if not the single largest assets held by the typical financial planning client. According to the Employee Benefit Research Institute (EBRI), at the end of 2001 (the most recent statistics available), Americans held about $10.7 trillion in such accounts. Of the total, almost $ 2.4 trillion, or 22.4%, was held in IRA and Keogh plans. Another $ 2.1 trillion, or 20%, was held in defined contribution plans. Until recently, much retirement planning advice was focused on how to accumulate wealth for retirement, but that focus is rapidly changing. With baby boomers approaching retirement age, demand for retirement saving advice will moderate while demand for retirement distribution advice is likely to explode.
Recently released books from two of the most respected names in the field of distribution planning, Ed Slott and Natalie Choate, should help advisors and their clients.
The Retirement Savings Time Bomb… and How to Defuse It By Ed Slott. Few individuals can make a complex subject like retirement distribution planning comprehensible, let alone entertaining, but anyone who has had the pleasure of listening to a live presentation by Ed Slott knows that he has that rare gift.
Life and Death Planning for Retirement Benefits, 5th Edition, 2003 Revised By Natalie C. Choate. While Ed Slott has done a tremendous job of translating the complex rules surrounding distribution planning into plain English, Life and Death Planning for Retirement Benefits retains its position as the number one reference guide for serious practitioners. Now in its fifth edition, this newly revised and updated version, from one of the most highly respected experts in the field, is the quintessential reference guide for distribution planning specialists.
The first nine chapters offer a comprehensive explanation of the laws regarding retirement distribution planning. The final two chapters offer practical planning considerations and case studies. Finally, the appendices contain tables, checklists, sample designated beneficiary forms covering numerous contingencies, sample trust provisions and a sample power of attorney form. IRS Code citations are provided within the text so that the practitioner can refer to the relevant sections of the tax code as necessary.
Arranged by topic, this book offers comprehensive treatment not only of typical distribution subjects like the minimum distribution rule and Roth IRAs but also discusses many of less understood areas, such as Income in Respect of a Decedent (IRD), the Retirement Equality Act of 1984 (REA), the treatment of non-citizen spouses, trusts as beneficiaries of retirement plans, charitable giving as it relates to retirement accounts, disclaimer and grandfather rules, to name just a few. The detailed table of contents, combined with the index, allows practitioners to find the information they need in short order.
For example, the chapter on non-citizen spouses not only discusses the tax issues that arise when an account holder’s spouse is a non-citizen, it examines four alternative strategies for dealing with the dilemma. Also discussed are some of the tricky situations that can arise as a result of selecting one of the strategies, like the deferred estate tax on principal distributions with regard to a QDOT-IRT.
There is a detailed explanation of Section 72(t), the “series of substantially equal periodic payments” exception to the 10% penalty on pre-age 59 1/2 distributions from a tax-deferred retirement account. Natalie Choate fully explains the three safe-harbor methods (RMD, amortization, and annuitization) and discusses how to properly structure and execute 72(t) distributions. This section has been updated to reflect IRS Revenue Ruling 2002-62, which, among other things, provides taxpayers for the first time with a method to legally alter a series of 72(t) payments without incurring dire consequences.
Life and Death Planning for Retirement Benefits is not a book you read and then relegate to the bookshelf. It is a hands-on user’s guide that every practitioner advising clients on retirement distributions should keep within easy reach for frequent referencing. With the demand for distribution planning advice on the rise, this is one book you cannot afford to be without.
Joel P. Bruckenstein, CFP, is co-author of the book Virtual Office Tools for the High-Margin Practice: How Client-Centered Financial Advisers Can Cut Paperwork, Overhead, and Wasted Hours. (See www.virtualofficetools.net for ordering information.)