Financially Speaking: “I” is For Individual
By LouAnn Schulfer, AWMA®, AIF® Accredited Wealth Management Advisor®
Accredited Investment Fiduciary®
A common misunderstanding that I come across working knee-cap to knee-cap with people is what an IRA is. IRA stands for Individual Retirement Account. “I” is for Individual. That means an IRA can only be owned by an individual, it cannot be jointly titled. When I am setting up accounts with new clients it is common that over the course of many working years, they have accumulated assets in several different areas. So, if you have a 401(k) or 403(b) from a former employer for example, you may find it most beneficial to roll that account out of your former employer’s retirement plan and into your own individual account – an IRA. Your husband or wife may likely have the same, so if it were the most beneficial choice for him or her, we would rollover their account into an IRA that is titled in his or her individual name as well. You likely have hard-earned money that you’ve saved outside of your retirement accounts; because that bucket of money is non-retirement, you can choose how to title that account, individually in either of your names or most common, a joint account with both of your names. Incidentally, joint accounts can be set up by any two or more individuals who want access to the same account, not just married couples. Each person listed on the account then has ownership rights to the money in that account.
So, as time goes on, what does that mean? For IRA’s, decisions are made by the Individual who owns it. In other words, the individual owner is the person who gives instructions on the account such as changes to be made in how or where the account is invested or money to be added or withdrawn from the account. When taking income or making withdrawals, money must be received by the individual who owns the account. When death occurs, your IRA transfers to a named beneficiary and from a tax standpoint, it is most often best to name your spouse. Conversely, with a joint account, either owner has the authority to make changes in the account at any time, including adding or withdrawing money. In the event of death, the surviving account owner usually has all rights to the money.
Be careful how you title your accounts. You must understand the laws that govern transfer of accounts to avoid penalties as well as unintended consequences. Think through the life of the account and the “what-if’s” or “what-when’s”.
(Author’s note: Due to industry regulations, I am not allowed to respond to any online comments. I welcome you to contact me via e-mail: [email protected]).
LouAnn Schulfer is co-owner of Schulfer & Associates, LLC Financial Professionals and can be reached at (715) 343-9600 or [email protected]. www.SchulferAndAssociates.com
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.
For a list of states in which I am registered to do business please visit www.SchulferAndAssociates.com .