Frequently Asked Questions

If all of the investments in your plan begin with the same name, your plan probably hasn’t been updated since the ‘90s.

If your Workplace Retirement Plan hasn’t changed at all in 3 or more years, you probably have a broker.

If you’ve been with the same company for over a year and don’t know what your Plan Advisor looks like, you probably have a broker.

If your employer gave your Workplace Retirement Plan to a company or bank as a favor, you may expect to work a few extra years.

Wall Street firms make money by gathering assets.  Stopping them from gathering yours will help you retire sooner.

Big investment companies making exotic commercials with celebrities likely subtract years from your retirement.

That First RMD from Your IRA

What you need to know.

Provided by Jonathan R. Broadbent, CRPS, AIF

When you reach age 70½, the IRS instructs you to start making withdrawals from your Traditional IRA(s). These IRA withdrawals are also called Required Minimum Distributions (RMDs). You will make them annually from now on.1

If you fail to take your annual RMD or take out less than what is required, the IRS will notice. You will not only owe income taxes on the amount not withdrawn, you will owe 50% more. (The 50% penalty can be waived if you can show the IRS that the shortfall resulted from a “reasonable error” instead of negligence.)1

Many IRA owners have questions about the options and rules related to their initial RMDs, so let’s answer a few.

How does the IRS define age 70½? Its definition is pretty straightforward. If your 70th birthday occurs in the first half of a year, you turn 70½ within that calendar year. If your 70th birthday occurs in the second half of a year, you turn 70½ during the subsequent calendar year.2

Your initial RMD has to be taken by April 1 of the year after you turn 70½. All the RMDs you take in subsequent years must be taken by December 31 of each year.3

So, if you turned 70 during the first six months of 2014, you will be 70½ by the end of 2014 and you must take your first RMD by April 1, 2015. If you turn 70 in the second half of 2014, then you will be 70½ in 2015 and you don’t need to take that initial RMD until April 1, 2016.2

Is waiting until April 1 of the following year to take my first RMD a bad idea? The IRS allows you three extra months to take your first RMD, but it isn’t necessarily doing you a favor. Your initial RMD is taxable in the year it is taken. If you postpone it into the following year, then the taxable portions of both your first RMD and your second RMD must be reported as income on your federal tax return for that following year.2

An example: James and his wife Stephanie file jointly, and they earn $73,800 in 2014 (the upper limit of the 15% federal tax bracket). James turns 70½ in 2014, but he decides to put off his first RMD until April 1, 2015. Bad idea: this means that he will have to take two RMDs before 2015 ends. So his taxable income jumps in 2015 as a result of the dual RMDs, and it pushes them into a higher tax bracket for 2015. The lesson: if you will be 70½ by the time 2014 ends, take your initial RMD by the end of 2014 – it might save you thousands in taxes to do so.4

How do I calculate my first RMD? IRS Publication 590 is your resource. You calculate it using IRS life expectancy tables and your IRA balance on December 31 of the previous year. For that matter, if you Google “how to calculate your RMD” you will see links to RMD worksheets at and free RMD calculators provided by the Financial Industry Regulatory Authority (FINRA), Kiplinger, Bankrate and others.2,5

If your spouse is at least 10 years younger than you and happens to be designated as the sole beneficiary for one or more IRAs you own, you should refer to Publication 590 instead of a calculator; the calculator may tell you that the RMD is larger than it actually is.6

If you have your IRA with one of the big investment firms, it might calculate your RMD for you and offer to route the amount into another account that you specify. Unless you state otherwise, it will withhold taxes on the amount of the RMD as required by law and give you and the IRS a 1099-R form recording the income distribution.2,5

When I take my RMD, do I have to withdraw the whole amount? No. You can also take it in smaller, successive withdrawals. Your IRA custodian may be able to schedule them for you.3

What if I have multiple traditional IRAs? You then figure out your total RMD by adding up the total of all of your traditional IRA balances on December 31 of the prior year. This total is the basis for the RMD calculation. You can take your RMD from a single IRA or multiple IRAs.1

What if I have a Roth IRA? If you are the original owner of that Roth IRA, you don’t have to take any RMDs. Only inherited Roth IRAs require RMDs.2

It doesn’t pay to wait. At the end of 2013, Fidelity Investments found that 14% of IRA owners required to take their first RMD hadn’t yet done so – they were putting it off until early 2014. Another 40% had withdrawn less than the required amount by December 31. Avoid their behaviors, if you can: when it comes to your initial RMD, procrastination can invite higher-than-normal taxes and a risk of forgetting the deadline.2



This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.


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Banks are loaded with fees.  This doesn’t stop when they take over your Workplace Retirement Plan.

The business owner’s college buddy may not be the best person to lead your pension.

The business owner’s personal broker may not be the best person to lead your pension.

A broker or agent distributing enrollment booklets is not the same as a Plan Adviser.

If fees are really high but hard to figure out, don’t expect great service.

If fees get too low, be prepared for limited service.

Trusting a broker or salesperson to lower your fees will be a long wait.

Longevity Income Annuities

Generally, annuities have contract limitations, fees, and expenses. While the taxation of annuities held within tax-qualified plans may differ, withdrawals of annuity earnings outside of qualified plans are taxed as ordinary income. Early withdrawals prior to age 59½ may be subject to a 10% federal income tax penalty.

With luck, many of us can expect to live to a very ripe old age. Are you prepared, however, for the financial implications of that possibility?

Today, individuals contemplating retirement frequently face the fact that the financial costs associated with retirement will fall largely on their own shoulders. Even though you may set aside funds, you may not set aside enough to cover your needs into very old age. In other words, you have to face the very real possibility that you might outlive your retirement accounts. How can you address the risk of outliving your savings? One option that might be worth considering is a longevity income annuity.

What is a longevity income annuity?

A longevity income annuity (LIA), also referred to as a deferred income annuity or longevity insurance, is a contract between you and an insurance company. As the insured, you deposit a sum of money (premium) with the company in exchange for a stream of payments to begin at a designated future date (typically at an advanced age, such as age 80) that will last for the rest of your life. The amount of the future payments will depend on a number of factors, including the amount of your premium, your age, your life expectancy, and the time when payments are set to begin.

Caution: Guarantees are subject to the claims-paying ability and financial strength of the annuity issuer.

That's the basic concept, although some LIAs might offer other options including:

•   The opportunity to make additional premium contributions up to the date payments are to begin

•   Cost-of-living adjustments that can increase annuity payouts

•   Death benefit or return of premium to your beneficiary if you don't live long enough to receive payments equal to the amount of your total contributions to the LIA

•   The option to "cash out" the LIA prior to the time payments are to begin, although this usually involves surrender fees that likely will reduce the amount returned to you

Can an LIA be used with a tax-qualified plan?

A portion (or most) of your retirement savings may be held in tax-qualified retirement plans such as a

401(k), IRA, 457(b), or 403(b) plan. Can you purchase a longevity annuity within one of these plans? Yes, according to the final rules regarding LIAs issued by the U.S. Department of the Treasury and the IRS.

The press release announcing the final rules explains that, "as boomers approach retirement and life expectancies increase, longevity income annuities can be an important option to help Americans plan for retirement and ensure they have a regular stream of income for as long as they live."

In general, the final rules:

•   Amend the required minimum distribution (RMD) rules so payments don't have to be taken from LIAs to satisfy RMD requirements

•   Set a maximum investment in an LIA to the lesser of 25% of the plan account balance or $125,000 (adjusted for cost-of-living increases)

•   Provide individuals with the opportunity to correct inadvertent LIA premiums that exceed these limits

•   State that the LIA must provide that payments begin no later than the first day of the month next following the participant's 85th birthday, although the maximum age may be adjusted later due to changes in mortality

•   Allow for LIAs to include "return of premium" death benefit provisions

•   Expand the manner in which a contract can be identified as an LIA

•   Provide that LIAs in qualified plans may not include "cash out" provisions, and no withdrawals are permitted in the deferral period, and, unless the optional death benefit or return of premium options are available, no payments will be made if the annuitant dies before the payment start date, although each of these restrictions may be found in LIAs that are not purchased within tax-qualified accounts

For more information, the final rules can be read here.


This information was developed by Broadridge, an independent third party. It is general in nature, is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Investments and strategies mentioned may not be suitable for all investors. Past performance may not be indicative of future results.

Lowering fees is the only sure-fire way to boost investment return.





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and other sources of information are not intended to replace the professional advice of a trained financial professional.

Investment advice is offered by Plan Partners, LLC, a Registered Investment Adviser.  Plan Partners, LLC is an Ohio Registered Investment Adviser and accepts clients outside of Ohio based upon applicable state registration regulations and the “de minimus” exception.
We offer you a wide range of services that are designed to help you, such as: a 401k plan, fiduciary and plan administration, a model portfolio and executive compensation in Cleveland, Ohio.

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