New IRA Rules For 2001 Present New Opportunities
Earlier this year, the IRS announced new rules that give individuals the opportunity to leave IRA funds invested longer, potentially stretching out the benefits of tax-deferred earnings over several generations.
These so-called "stretch" IRAs work as follows. You take only the minimum required amount from your IRA, and let the balance grow tax-deferred. Upon your death, your beneficiary recalculates the required distributions using his or her longer life expectancy. Again, only the required distribution is withdrawn each year to allow for maximum tax-deferred growth. Naming a younger beneficiary (your grandchild, for example) creates a longer potential tax-deferral period.
The National Association of Securities Dealers (NASD) cautions individuals to be wary of promoters promising huge payoffs based on this extended tax deferral because the assumptions they use might be flawed. For example, any of the following assumptions could produce an unrealistic projection:
NASD warns investors to understand the assumptions used in a sales presentation and to make sure they are reasonable and appropriate for your situation. Otherwise, you could invest in something that won't measure up to your expectations. Retirement planning can be complicated. Before moving any significant investment assets to a new plan, check with us to review your particular needs and retirement goals.
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© Copyright 2001 Raymond S. Kulzick. All rights reserved. 010901.
This publication provides business, financial planning, and/or tax information to our clients. All material is for general information only and should not be acted upon without seeking appropriate professional assistance.