Your IRA, or 401(k), is most likely your largest financial asset and you are counting on it for retirement income. The most costly mistake in managing this money is not in how it’s invested, it’s account transfers or rollovers, beneficiary designations, and required minimum distributions.

If one wrong transaction is made with an IRA or 401(k), it is most likely irreversible and causes tax liabilities and possibly penalties.

Questions we can answer

  • How do I turn my IRA or 401(k) into income in retirement?
  • What are my Required Minimum Distributions?
  • What about my Roth IRA? Should I consider a Roth IRA conversion?
  • Who should my IRA beneficiary be?
  • Should I plan to leave my IRA to my heirs?

IRAs = Retirement Income

IRAs and 401(k)s were created for retirement living expenses as a supplement to Social Security. Cardinal can help you outline strategies turning this money into income or, if not needed for income, consider strategies for a future guaranteed income, for you or your loved ones.

Cardinal Lessons on IRAs

Tax-Free Retirement Savings

Hans talks about how you can make the most of your money in retirement with tax-free retirement savings. Learn about the three types of money — taxable, tax-deferred, and tax-free — and how each can change your bottom line in retirement. Finally, Hans explains the best way to maximize tax-free money through a Roth IRA or maximum-funded life insurance. Who doesn’t love tax-free money? Board Transcript: Tax-Free Retirement Savings 1) Taxable: Money market. CDs, stocks, bonds, mutual funds, employment income, rents, and dividends Liquidity 1099 2) Tax-Deferred: Traditional 401(k), IRA, 403(b), 457, simple, SEP… Principal + interest taxed when it’s distributed 1099 RMDs starting at 72 Death benefit taxable (other than spouse) 3) Tax-Free: ROTH IRA: | MAXIMUM-FUNDED LIFE INSURANCE PRINCIPAL | Already taxed | Already taxed EARNINGS | Tax-free | Tax-free DEATH BENEFIT | Tax-free & = cash value | Tax-free & > (greater than) cash value LIFE-INSURANCE COST | No | Yes RE-DEPOSIT WITHDRAWALS | No | Yes LONG-TERM CARE BENEFIT | No | Yes GUARANTEES | No | Yes CORRELATED TO THE STOCK MARKET | Yes | No CAN BE REMOVED FROM TAXABLE ESTATE | No | Yes Call us at (919) 535-8261 | Visit our website at | Listen to the “Finishing Well” Podcast Email Hans at

The 20 Ways IRAs Are Different from Your Other Money!

Many of you have your retirement savings in an IRA. Hans talks about how to efficiently plan so that these funds can be used and passed on to your beneficiaries. Call us at (919) 535-8261 or visit our Website at Board Transcript: IRAs Are Different: The Black Hole of Estate Planning Pass by contract, generally not by will Required minimum distributions (RMDs) Complex distribution rules during life and after death, changed by SECURE Act Distributions can incur tax penalties Highly taxed upon death or withdrawal Double tax at death (estate and income tax, + state versions) + IRS penalties that can apply to withdrawals NO step-up in basis Investment gains taxed as ordinary income, not capital gains rates Investment gains not subject to 3.8% investment income surtax IRAs cannot be gifted or transferred during lifetime | Exceptions: A direct gift to a charity (qualified charitable distribution, QCD) Court-ordered transfer as part of a divorce agreement IRAs cannot be transferred to trusts during lifetime or after death IRAs cannot change ownership during lifetime — this would trigger an immediate and complete distribution and end the tax shelter Cannot be owned jointly like other property, even in community property states IRA equity cannot be tapped without triggering tax and potential IRS penalties Choice of IRA beneficiary determines the potential value to beneficiaries Trusts named as IRA beneficiaries must qualify under special IRS rules Even trusts that do may not work as planned under SECURE Act changes No separate account rules for trusts named as IRA beneficiaries IRA beneficiaries may qualify for special tax breaks that are often missed IRAs have no principal or income concept IRAs require their own estate plans, must be integrated within the overall estate plan Remember to subscribe! Email:

401(k) to Fund LTC

A case study of how one couple is using part of their 401(k) to fund a variety of future needs.

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IRAs: Tax Free Roth vs. Tax Deferred

Where your money is put has a significant impact on your retirement income. For many retirees, most of their assets are in their IRA or 401(k).

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IRAs: Calculating your RMDs

Waiting until age 72 to start withdrawing money from your IRA/401k seems like smart tax strategy on the surface, but when you view it over a lifetime it creates a tax problem for your heirs.

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IRAs: Retirement Savings After 70

The Secure Act also has large implications for those who are planning for retirement but younger than 70 and 71.

The Cardinal Guide To:

Listen to learn:

Transfer IRA or 401(k) money from custodian to custodian. Don’t touch the money unless you want to risk paying taxes on all of it.

Update your beneficiary designations regularly. IRA and 401(k) money passes straight to the named beneficiary after death, bypassing the will and probate.

Required Minimum Distributions (RMDs) start at age 72 now that the Secure Act is law. In simple terms, you have postponed taxes in your IRA or 401(k) for years, and the government wants their tax money. RMDs are calculated based on the amount in your IRA and 401(k) and your estimated life expectancy. Failure to withdraw the appropriate RMDs will cause penalties as much as 50% of the shortfall.

RMDs can significantly increase your tax bill, resulting in taxes on income from Social Security and Medicare’s IRMAA. Qualified Charitable Distributions and Roth IRA conversions are strategies to lower tax from RMDs.

Stockpiling money in an IRA, taking only RMDs, to create an inheritance for your kids isn’t a smart estate planning strategy. There are ways to pay the taxes during your lifetime and leave tax-free money to your heirs.

IRAs are commonly one of the first places adult children go to pay mom or dad’s long term care bill. IRA withdrawals are taxable as ordinary income, and your long term care bill can create a corresponding tax deduction as a medical expense. But you need smart planning in order to optimize using your IRA for long term care. There are long term care insurance policies you can roll part of your IRA into for comprehensive long term care coverage.

If you take money from your IRA before age 59 ½ , you will incur very large penalties in addition to the tax. There are exceptions to the early withdrawal penalty, but IRA and 401(k)s should be your last resort in a financial emergency.

Certified Public Accountant Ed Slott has developed a reputation as “America’s IRA expert” (see Hans partnered with Ed and completed IRA-specific training with a goal to help clients with their IRAs and 401(k)s beyond what he learned as a Certified Financial Planner™ professional . Don’t try IRA planning on your own. Seek an advisor and attorney who know what they’re doing with IRAs.

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