…and that could cost you

By LouAnn Schulfer
AWMA®, AIF®
Accredited Wealth Management AdvisorSM
Accredited Investment Fiduciary®

The world we live in is complex and managing your money is no exception. Layers of rules and regulations make managing your assets more complicated than merely selecting investments to achieve a rate of return. One of my favorite sayings (I have teenage boys) is “You don’t know what you don’t know”.

For parents, this is easy to appreciate as it applies to raising teenagers. With your retirement planning and your money though, what you don’t know could cost you. Here are a few examples that I’ve helped people through recently:

Inheriting an IRA.

Did you know that the IRS rules are different when it comes to inheriting an IRA from a spouse versus a non-spouse? The benefit of being a beneficiary on your husband or wife’s IRA is that you can continue the IRA as if it had originally been your own; therefore, all of the same rules that you’ve been used to can continue to apply.

Say you inherit an IRA from a parent, a brother or a sister though; you must realize required minimum distribution (RMD) rules for an inherited IRA. Generally, you have a couple of choices as to how to take the RMD, namely to either take RMD’s beginning in the year following death OR to take the entire IRA as a distribution within five years. If you didn’t know this and missed it, the penalty is 50 percent of what you should have taken as RMD.

Titling of accounts.

This is a big one and I’ve seen it done sloppy way too often. Do you have a trust? Are your non-retirement assets titled in your trust? If not, they will not be included in the trust nor will they be subject to the instructions of the trust upon your death. Joint Accounts. Both joint holders have equal right to all assets in the account, as well as making changes to the account.

Therefore, if you name a spouse, child or business partner as a joint holder to the account and the relationship goes sour, that person can cash out the account without your consent. The opposite is true, too. If you have an individual account, your spouse does not have automatic rights to make changes or even receive information about the account. If you were to become incapacitated or simply cannot be reached if you are traveling, your spouse does not have automatic rights to an account titled in your name only. These are just a few simple examples. Take care to understand the titling of your accounts and what any abbreviations in the account title mean.

Pensions and Social Security.

Pension sponsors and the social security administration give us a great deal of flexibility as to how we can choose to receive our guaranteed sources of retirement income, including when to start receiving benefits. The guarantors do this because they understand that the many circumstances which should influence the decision of how and when to take income are genuinely different.

Believing that there is always a “best” option that applies to everyone for social security, such as either delaying your benefit or taking your benefit as early as possible, is a mistake. Likewise, buying into conversation from your colleagues that the reason your pension gives you options is to try to trick you, is also a misunderstanding. Know the options available and consider how they can work best for you.

Finally, if you choose to work with an adviser, it is extremely important to know who you are entrusting your money to. FINRA, the Financial Industry Regulatory Authority, oversees the people and firms that sell stocks, bonds, mutual funds and other securities. FINRA’s broker-check (brokercheck.finra.org) will tell you whether or not that individual has securities licenses registered with FINRA, which securities licenses they hold, their employment history, and if there are complaints or disclosure events in their background such as litigation or even bankruptcy.

(Author’s note: Due to industry regulations, I am prohibited from responding 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. Accredited Wealth Management Advisor SM and AWMA® are trademarks or registered service marks of the College for Financial Planning in the United States and/or other countries. The Accredited Investment Fiduciary® designation is earned through the Center for Fiduciary Studies.