Planning for Retirement? Don't Overlook These Milestones With millions of Americans owning tax-advantaged retirement accounts, totaling $28 trillion in assets, in many types of accounts—such as a 401(k), 403(b), 457, and an IRA (Roth, traditional, SIMPLE, SEP, SAR SEP, rollover, inherited, etc.), each with their own rules—it’s little surprise that slip-ups and or oversights occur all too frequently. Misunderstanding or outright ignoring a number of key dates, for example, can be costly—in terms of financial penalties and/or lawyers and accountant fees, not to mention considerable time to amend the errors. [+] Read More

Here’s the nitty-gritty on naming a trust beneficiary, plus insights on trust mechanics and taxation, and why bequeathing a Roth IRA appeals to many investors. Owners of a 401(k) plan or IRA account, depending on their estate and legacy-planning goals, have the option to name a trust as a beneficiary instead of an individual (e.g., spouse, child, grandchild, etc.). In last week’s column, I covered the strict, complicated, and cumbersome IRS rules to be followed so that the oldest trust beneficiary can use his/her own life expectancy to determine post-death payouts, including the requirement that the trust qualify as a “look-through.” So long as the trust qualifies, the “stretch” technique (whereby payments can be “stretched” out over a period of time) can be utilized. Instead, assuming the trust qualifies as a “look-through,” you must use the life expectancy of the oldest trust beneficiary for required minimum distributions (RMDs). For this reason, anyone naming multiple trust beneficiaries ideally should see that they are close in age. Further, if any of the trust beneficiaries is not an individual (e.g., estate, charity), there would be no designated beneficiary for distribution purposes, even if the trust qualifies as a look-through; thus, trust beneficiaries would not be able to stretch post-death RMDs over the life expectancy of the oldest beneficiary. If the trust fails to qualify as a look-through, then it has no life expectancy. Generally, the entire account must be distributed to the trust within five years. [+] Read More

Such a strategy can be beneficial, but be sure to consult an experienced attorney and tax professional to navigate the maze of rules. In the first of a two-part series, money manager Lord Abbett tackles some of the complexities of designating a trust as an IRA beneficiary. Increasingly, clients are relying on their advisors for advanced beneficiary-planning strategies, such as naming a trust as the beneficiary of a retirement account. Designating a "look-through" trust as an IRA beneficiary can be tricky and complicated, with potentially serious tax consequences if done incorrectly. Advisors and their clients need to be aware of the nuances and appropriateness of these arrangements. Typically, qualified retirement plans and IRAs are not subject to probate. Instead, retirement assets are distributed according to account owners’ current beneficiary designation. Naming rules are very liberal, thus offering IRA owners a number of options in designating a beneficiary; in fact, any individual and/or non-individual (charity, estate, or trust) can be a named beneficiary. But if IRA assets are moved into the trust, either while the account owner is alive or at death, a distribution subject to income tax has occurred. Tip: Never move IRA assets into the trust. Doing so will result in a taxable event on the entire IRA balance. Instead, name a trust as beneficiary on the IRA beneficiary form. Why would the owner of an IRA want or need to name a trust, rather than a person, as his or her beneficiary? [+] Read More

Net unrealized appreciation allows for favorable tax treatment of withdrawals of an employer's stock - but understanding the rules is crucial. Of all the various ways to reduce one’s taxes in retirement, net unrealized appreciation (NUA) is often misunderstood or overlooked altogether. The rules may be complicated, but a plan participant who owns company stock and is separating from service or retiring should be aware of NUA before rolling his/her retirement account into an IRA or a new employer’s plan. Net unrealized appreciation of employer stock held in an employer-sponsored retirement plan permits gains that occurred inside the plan to be taxed outside the plan (e.g., brokerage account) at preferential long-term capital gains rates. [+] Read More

Qualified charitable distributions (QCD) are poised to become even more popular under the new tax law. While the Tax Cuts and Jobs Act (TCJA) generally doubled the standard deduction, while eliminating many itemized deductions, financial advisors will want to update their clients on the potential tax-saving benefits of qualified charitable deductions (QCDs) now that they have been made permanent. Remember that a charitable contribution is itself an itemized deduction, so most taxpayers will no longer receive the full deduction value—unless all other itemized deductions exceed the standard deduction amount. In other words, far fewer taxpayers will itemize, thus fewer taxpayers will be able to take advantage of the deduction for charitable giving. [+] Read More

Money Managers continue to reflect on the market volatility from last week, lessons learned, and consider what's to come. This week's post is another compilation of articles from three different money managers. Lord Abbett's day-by-day recap of last week's market ups and downs. Senior Portfolio Manager Bob Doll shares Nuveen's outlook on market volatility and other factors investors should consider, while Federated Investors focuses in on dividend investing in 2018. Lord Abbett and Company Nuveen Asset Management Federated Investors [+] Read More

Money Managers have had plenty to say about the market volatility that started last week. That’s why this week we’re doing something different. The post below is a compilation of five different commentaries. As usual, you can read the excerpt below, or click the link to download the full version of each of the individual commentaries. Keep reading to see what the following money managers say about this week’s volatility. Lord Abbett and Company Cambiar Investors Nuveen Asset Management Federated Investors ClearBridge Investments [+] Read More

Review your retirement plans to maximize potential savings for you and your family... Lord Abbett's 2017 Retirement Tips - Year End Checklist includes important information for anyone who turned age 50 or 70½ in 2017, and for investors taking required minimum distributions (RMDs). The article also addresses common retirement investing questions such as: - Can you make IRA contributions if you participate in an employer-sponsored retirement plan? - What can you do to optimize the tax implications of converting a traditional IRA to a Roth IRA in 2017? - Did you make a nondeductible (aftertax) IRA contribution? - If you are subject to RMDs, have you included the value of all your IRAs in the calculation? Continue reading to review some of Lord Abbett's year-end retirement tips, or download the complete checklist and review your retirement plan. [+] Read More

In part one of a two-part Market View, Lord Abbett explored investor concerns about the ongoing flattening of the yield curve. A flat two-year–10-year U.S. Treasury yield curve suggests an expectation of falling short-term interest rates, or an extended period of very low short-term rates, corresponding to presumptions of a weak U.S. economy and disappointing corporate earnings. In turn, those developments would have negative implications for U.S. equity prices. To address those concerns, Lord Abbett turned to Giulio Martini, Lord Abbett Partner and Director of Strategic Asset Allocation for his views on the yield curve and its relationship to economic growth, corporate profits, and, ultimately, U.S. equity prices. Read on for an introduction to Martini's analysis, or view the entire document here. [+] Read More