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Distributions - misc

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[Discussion]Beneficiary Distribution Options
"Say a participant dies while in pay status -- he is receiving installments. Once he dies, can the plan allow a beneficiary to change the form of payment, or is the beneficiary locked into whatever the participant chose? What if the participant was not in pay status? Can the plan allow the beneficiary to elect how he receives the payment?" (BenefitsLink Message Boards)
[Official Guidance] Text of Federal Retirement Thrift Investment Board Announcement Relaxing Hardship Withdrawal Rules to Help Victims of Hurricane Irma (PDF)
"Beginning today, the [Thrift Savings Plan] will treat any Financial Hardship In-Service Withdrawal Request received until January 24, 2018 as qualifying for a hardship withdrawal if the participant writes 'Hurricane Irma' at the top of the form and checks the block on the form for personal casualty on page 2, Item 18 of the form. The distributions must occur before January 31, 2018 to qualify for this treatment." (Federal Retirement Thrift Investment Board [FRTIB])
[Guidance Overview] Hardship and Loan Relief Extended to Hurricane Irma, Along with Relief for Single Employer DB Plans
"[E]mployers who sponsor 401(k), 403(b) and 457(b) plans may receive these requests [for hardship withdrawals] and can choose to provide this relief even though the employer and its plan are not located in one of the affected areas, because the relief is extended to employees and former employees who have lineal ascendants... who had a principal residence or place of employment in one of the designated counties. For a hardship distribution provided under this relief, the employer is not required to stop the employee receiving the hardship distribution from making elective deferrals for six months as is required for other hardship withdrawals." (Winstead PC)
[Guidance Overview] Retirement Plan-Related Relief for Victims of Hurricane Irma
"The Internal Revenue Code and IRS regulations impose significant limitations on when participants may access assets from retirement plan accounts through loans and distributions while actively employed. In addition, many plans provide for additional limitations. The IRS has provided limited relief from these restrictions for certain participants affected by Hurricane Irma.... It is important to note that the IRS relief does not provide relief from the additional 10% tax on early distributions for eligible individuals who obtain distributions." (Mazursky Constantine LLC)
[Official Guidance] Text of IRS Announcement 2017-13: Relief for Victims of Hurricane Irma (PDF)
"This announcement provides relief to taxpayers who have been adversely affected by Hurricane Irma and who have retirement assets in qualified employer plans that they would like to use to alleviate hardships caused by Hurricane Irma. In addition, this announcement provides relief from certain verification procedures that may be required under retirement plans with respect to loans and hardship distributions.... The [DOL] has advised Treasury and the IRS that it will not treat any person as having violated the provisions of [ERISA] solely because that person complied with the provisions of this announcement." (Internal Revenue Service [IRS])
IRA Balances, Contributions, Rollovers, Withdrawals, and Asset Allocation: 2015 Update of the EBRI IRA Database (PDF)
44 pages. "The average IRA account balance in the database was $99,017 at year-end 2015 and the average IRA individual balance (combining all accounts owned by the individual) was $125,045.... The overall IRA withdrawal percentage was largely driven by activity among individuals ages 70-1/2 or older owning a Traditional IRA -- the group required to make withdrawals under the required minimum distribution (RMD) rules.... [A]mong owners under age 60, fewer than 12 percent of any age group had a withdrawal." (Employee Benefit Research Institute [EBRI])
[Discussion] When Do the Restrictions of Treas. Reg. 1.401(a)(4)-5 Apply?
"Treas. Reg. section 1.401(a)(4)-5(b)(3) provides that benefits otherwise payable to restricted employees (generally the 25 HCEs with the highest compensation) under a defined benefit plan are limited if the plan is not at least 110% funded after the distribution; further, if the value of the benefit is less than 1% of the plan's current liabilities, the restrictions do not apply. Is the 1% exemption only applicable at benefit commencement date or (like the 110% Test) is the 1% exemption applied at every payment date, so that the full amount can be paid once the value falls below 1%?" (BenefitsLink Message Boards)
Replace the Stretch IRA?
"[M]ost IRA owners and beneficiaries do not benefit from the 'stretch,' because: [1] The life expectancy payout is available only if the deceased IRA owner named the individual as his 'designated beneficiary.' Many participants flub this step, causing their retirement benefits to pass to their estate rather than directly to family members.... [2] A trust named as beneficiary can qualify for the life expectancy payout under IRS rules -- but only if it meets stringent IRS requirements.... [3] [It] is actually rare for an IRA to be left to a young individual who would qualify for a multidecade payout. [4] Even when the stretch payout is an option, many beneficiaries prefer an immediate cashout over a deferred payout." (Morningstar Advisor)
[Discussion] Amount Available for Hardship Distribution Following a Loan
"Plan allows loans and hardship distribution only from employee deferrals (no gains). Employee contributes $10,000, balance is $12,000. Then receives a loan for 50% vested balance ($6,000 total). In the employee's situation, he would qualify for up to $10,000. But I believe the employee can receive no more than $6,000 as a hardship distribution. Agree?" (BenefitsLink Message Boards)
[Discussion] Different Distribution Options for Differently Invested Money?
"We have a 457(b) Plan (tax-exempt, not governmental) in which the plan sponsor wants a terminating participant's fixed-rate fund account to be distributable in certain ways but the mutual fund account to be distributable in several additional ways. Is this OK?" (BenefitsLink Message Boards)
[Discussion] 10-Year Period Certain Annuity But Both the Participant and the Beneficiary Have Died
"Unmarried participant elected to receive DB Plan benefits in this form, and named a beneficiary to receive any further payments after her death, but did not provide for the contingency that the beneficiary would die inside of 10 years. Participant died with the 10 years after payment commenced, then beneficiary died, also inside within the 10 years. Who should get the remaining payments?" (BenefitsLink Message Boards)
[Guidance Overview] Retirement Plan Relief for Hurricane Harvey
"[IRS Announcement TX-2017-09] provides ... relief postponing numerous deadlines to January 31, 2019.... Announcement 2017-11 simplifies and streamlines loans and hardship distributions in the wake of Harvey.... The relief related to hardship distributions applies to plans that the law allows to provide for hardship distributions.... The documentation relief applies to all types of plans eligible to make plan loans, including qualified plans, 403(b) plans, and governmental 457(b) plans.... The Announcement does not provide any relief for 457(b) plans sponsored by tax-exempt organizations. While the Announcement does not expressly mention 409A plans, it is likely that the IRS would find that Harvey is an unforeseeable emergency permitting distributions under those plans.... The DOL issued a press release outlining several points relating to Hurricane Harvey[.]" (S. Derrin Watson, via ERISApedia)
[Discussion] How to Move Money from Employer's Old 457(b) Plan to Employer's New 457(b) Plan?
"We have an employer who wants to freeze their current 457(b) plan and start a new 457(b) plan. The employer also wants to allow participants to roll their account balances from the current 457(b) plan into the new one. The employer is tax exempt (not governmental) and the plan-to-plan transfer rules in 1.457-10(5) require that 'the participant has had a severance from employment with the transferring employer and is performing services for the entity maintaining the receiving plan.' This would seem to ruin our client's plans. Any other way?" (BenefitsLink Message Boards)
[Official Guidance] Text of IRS Announcement 2017-11: Retirement Plans Can Make Loans, Hardship Distributions to Victims of Hurricane Harvey (PDF)
The relief provided under this announcement is in addition to the relief already provided by the [IRS] ... for victims of Hurricane Harvey.... [A] qualified employer plan will not be treated as failing to satisfy any requirement under the Code or regulations merely because the plan makes a loan, or a hardship distribution for a need arising from Hurricane Harvey, to an employee or former employee whose principal residence on August 23, 2017, was located in one of the Texas counties identified for individual assistance by [FEMA] because of the devastation caused by Hurricane Harvey or whose place of employment was located in one of these counties on that applicable date or whose lineal ascendant or descendant, dependent, or spouse had a principal residence or place of employment in one of these counties on that date.... [A] retirement plan will not be treated as failing to follow procedural requirements for plan loans (in the case of retirement plans other than IRAs) or distributions (in the case of all retirement plans, including IRAs) imposed by the terms of the plan merely because those requirements are disregarded for any period beginning on or after August 23, 2017, and continuing through January 31, 2018, with respect to loans or distributions to individuals described in [this Announcement] above, provided the plan administrator (or financial institution in the case of distributions from IRAs) makes a good-faith diligent effort under the circumstances to comply with those requirements." (Internal Revenue Service [IRS])
[Official Guidance] IRS Publication 1220: Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G for Tax Year 2017 (PDF)
150 pages, August 2017 revision date. Includes a "First Time Filers Quick Reference Guide" with information about Form 4419, Application for Filing Information Returns Electronically (FIRE), which is used to request authorization to file Forms 1097, 1098 Series, 1099 Series, 3921, 3922, 5498 Series, 8027, 8955-SSA, 1042-S, and W-2G electronically through the Filing Information Returns Electronically (FIRE) System. Excerpt: "Allow a 45-day processing timeframe prior to the earliest information return due date." (Internal Revenue Service [IRS])
[Discussion] ROBS and Bankruptcy
"I have a client who did a ROBS (rollover business start up). His entire retirement savings is now invested in a company that is on the brink of bankruptcy. If the company files for bankruptcy, what happens?" (BenefitsLink Message Boards)
[Discussion] Terminating Plan with Unresponsive Beneficiary
"Terminating plan includes a deceased participant's account in the 5-figure range. Beneficiary designation names his spouse, but she isn't responding to requests for distribution instructions. Plan requires distribution within 5 years of the death. Recordkeeper says IRS regs prohibit a force-out of the account of a death beneficiary and that the plan must stay open until the beneficiary decides to withdraw the balance. Is that true?" (BenefitsLink Message Boards)
Are You Overestimating Your Future Retirement Spending Needs?
"[T]otal mean spending decreases with age.... [M]uch of the decrease in mean spending ... may be explained from spending reductions generally associated with retirement: Reduced FICA taxes; Reduced taxes; and Reduced work-related expenses, including savings for retirement.... [There are] several approaches you can consider (either before or after retirement) to possibly avoid over-estimating your spending needs in retirement ... These approaches are all designed to increase current spending budgets. You should be aware, however, that increasing current spending budgets may also decrease future spending budgets, all things being equal, so these approaches should be considered more as 'Budget Shaping' approaches." (Ken Steiner, FSA Retired)
[Discussion] Money Purchase Merger Into 401(k): Segregation of Investments Required?
"A governmental money purchase plan (which did not permit in-service withdrawals) is merging into a grandfathered 401(k) plan, which permit hardship withdrawals. Following the merger, does the money purchase monies have to be segregated to retain the in-service withdrawal restriction OR can participants take hardship withdrawals of these dollars?" (BenefitsLink Message Boards)
Transferring IRA Money to a Health Savings Account
"People who still qualify to make HSA contributions can make a one-time rollover from an IRA to an HSA, which can be a good way to build up the account if you don't have other cash to contribute. You must currently have an HSA-eligible health insurance policy with a deductible of at least $1,300 for single coverage or $2,600 for family coverage. The amount you can roll over is the same as your annual HSA contribution limit[.]" (Kiplinger)
Close Is Not Enough When It Comes to the 10% Penalty
"There is an exception to the 10% early distribution penalty for IRA distributions due to an IRS levy. The Pritchards said that even though the IRA distribution was not actually due to a levy by the IRS, it was pretty close because the funds were used to pay taxes and, therefore, this exception to the 10% penalty should apply. Basically, the Pritchards argued that close was good enough. The Court disagreed[.]" [David D. Pritchard et ux. v. Comm'r, T.C. Memo. 2017-136 (July 10, 2017)] (Slott Report)
Key Rules for Non-Spouse Beneficiaries
"It is very important to check the terms of the agreement that governs the inherited retirement account to determine if the beneficiary is subject to the five-year rule or the life expectancy rule. In some cases, the beneficiary might be required to make an election by certain deadlines in order to be subject to the rule that he wants to use." (Appleby Retirement Dictionary)
Hardship Distributions: Source Documents vs. Documentation of Self-Certification by Participants
"If the third-party administrator is obtaining a summary of the information contained in the source documents, it should provide a report or other access to this data to the employer at least annually, describing the hardship distributions made during the plan year.... Hardship distributions issued in prior years should be reviewed to ensure that either the old rules or the new rules were followed." (Belfint Lyons & Shuman, CPAs)
Leaving an IRA to Charity
"[O]pening an inherited IRA is not necessarily easy for a charity.... [C]onsider opening a donor-advised fund run by a major financial institution, community foundation, or umbrella charity.... [Another approach is to leave all] assets including the IRA to [a personal] trust. The trust instrument states what percentage of the total trust each beneficiary is to receive and specifies that the IRA shall be used 'first' to fund the charities' shares." (Morningstar Advisor)
Income for Life: Using Deferred Income Annuities in Retirement
"Deferred income annuities (DIAs) can help you insure against the possibility of outliving your assets in retirement. DIAs can offer the same level of benefits after the deferral period as immediate annuities for a much smaller up-front payment. DIAs generally aren't liquid so you can't withdraw their value as cash, but knowing that you'll get a guaranteed income for life could free you to keep more of your other savings invested." (Charles Schwab)
The Trusteed IRA vs. Using a Trust as IRA Beneficiary
"[A] trusteed IRA really doesn't provide any benefits that can't already be accomplished with a (separate) trust as beneficiary. And in fact, having a standalone trust drafted to be the beneficiary of a retirement account can provide even more flexibility, or more robust spendthrift and asset protection for future beneficiaries." (Nerd's Eye View)
Budgeting to Meet Your Spending Goals in Retirement vs. Cobbling Together Sources of 'Lifetime Income'
"[T]he major actuarial organizations in the U.S. appear to be more focused on advocating the cobbling together of various lifetime income 'solutions' (including lifetime income insurance products and SWPs) than advocating the use of basic actuarial principles to help individuals achieve their spending goals.... [T]he actuarial calculations required to develop a reasonable spending budget, that reflects your specific situation and that is consistent with your goals, can be somewhat complicated.... By using the Actuarial Approach, [a sample couple] increased their initial spending budget by almost 53% and, on an expected basis, satisfied all of their spending goals." (Ken Steiner, FSA Retired)
401(k) Rollovers: To Roth or Not to Roth?
"[1] Can you afford to pay the tax that results from a conversion? ... [2] Will a conversion bump you up to a higher tax bracket? ... [3] Beyond the impact on federal taxes, what's the impact on your state tax? ...[4] Will this have an impact eligibility for Medicare or other government programs? ...[5] When do you need the money? ... [6] Do you want a diversification of taxable/non-taxable accounts? ... [7] What professional do you wish to work with?" (Fiduciary News)
Are We Ready to Provide Annuities and Other Drawdown Solutions from DC Plans?
"DC plans have been focused on the accumulation of assets for retirement, and the DC industry has spent considerable effort to improve investment offerings, control costs, encourage participation, and streamline the technology of the participant's interaction with the plan. But what about the distribution of accumulated savings to retirees?" (Callan Associates)
[Guidance Overview] The Hardship of Administering 401(k) Plan Hardship Withdrawals
"Many employers contract with a third-party administrator or platform vendor to administer the hardship application and approval process. But, even if outsourced, employers are the ones at risk of tax liabilities or plan disqualification ... In February 2017, the IRS indicated a softening of its views on the hardship paperwork burden; employers may now want to reconsider how they or their vendors process hardships as a result." (Frost Brown Todd LLC)
[Discussion] Hardship Distribution for Home Purchase, Then Deal Falls Through
"Participant legitimately requested a hardship withdrawal, had all proper paperwork, etc. -- the check was issued, cashed and deposited, and now the deal has fallen through at the closing. Participant wants to know if the funds can be contributed back into the plan." (BenefitsLink Message Boards)
Retirement Income Strategies for Next Bear Market
"In addition to being dynamic with your withdrawal amounts, you will decrease the risk of running out of money if you are dynamic with what you sell to generate income. In 2008, the S&P 500 was down 37%, while the Barclays Capital Aggregate Bond Index (as it was known then) was up 5.24%. In that scenario, if you are forced to take income, take it from the bond side of the portfolio. That will give the stocks time to rebound." (Kiplinger)
[Guidance Overview] 401(k) Hardship Distributions: Do They Have to Be So Hard?
"Although many providers, including the largest and most well-known, have used online, participant self-certification to process hardships, serious questions remain whether this process is adequate -- and the employer, not the provider, remains responsible for any improper hardships. Recent changes to IRS audit guidelines for its examiners indicate the IRS may be more flexible than in the past, as long as certain notice and documentation requirements are met." (Warner Norcross & Judd LLP)
[Opinion] What's an Appropriate Discount Rate for Personal Financial Planning?
"[W]hile historical asset class returns give us a sense of what we might expect in the future from various asset mixes, there are no guarantees that these historical returns will continue in the future, and higher expected investment returns generally do not come without additional risk.... [C]onsideration of this additional investment risk is an important part of the 'appropriate discount rate' determination that should not be ignored. Mr. Kitces' advice is potentially inconsistent with the basic financial economic principle that the value of a future stream of payments should be determined by finding a portfolio of assets that matches the benefit stream in amount, timing and probability of payment." (Ken Steiner, FSA Retired)
Discount Rates for Social Security or Pension Decisions
"[T]he fact that the proper discount rate is the investor's expected rate of return, means that the 'right' discount rate will vary from one person to the next, based on their investment approach and risk tolerance. For those who are more inclined towards aggressive investments, a higher discount rate may be used, while those who are conservative will use a lower discount rate of interest ... [I]nvestors must still be cautious to pick a discount rate that is actually realistic to the portfolio in the first place -- otherwise, an unrealistically high discount rate will lead to decisions that turn out to be less-than-optimal after the fact, when the money-in-hand doesn't actually produce the expected results!" (Nerd's Eye View)
[Official Guidance] Text of IRS Chief Counsel Memo 2017-18: Rollover of IRA Distributions from Failed Financial Institution (PDF)
"[An] IRA distribution made from a failed financial institution by the FDIC as receiver is disregarded for purposes of applying the one-rollover-per-year limitation, provided: [1] neither the failed financial institution nor the depositor initiated the distribution, and [2] no financial institution has assumed the IRAs of the failed financial institution." (Internal Revenue Service [IRS])
Catch 22 Situations With Retirement Plan Distributions
"Sometimes you need a particular form of distribution to achieve a certain tax result, but the retirement plan doesn't allow it. Or sometimes the tax law seems to say opposite things about the same distribution.... Retiring between age 55 and age 59 1/2.... 401(k) hardship distribution subject to the 10% penalty.... Estate wants to use the five-year payout." (Natalie Choate, in Morningstar Advisor)
How ETFs Might Help Retirees Better Manage Distributions
"Although many legal boundaries stand in the way, instead of receiving a cash lump sum, retirees could instead receive a balanced portfolio of ETFs allocated based on a specific risk profile. With the onset of digital advice from independent platforms as well as from traditional brokerage firms and wealth managers, the barriers to integrating an ETF portfolio into a beneficiary's new or existing account are falling." (Pensions & Investments)
Retirement Calculators: Three Good Options
"Calculators aren't capable of providing a bullet-proof analysis of the complex factors and future unknowns that will determine whether someone has done the planning and saving required to ensure a financially secure retirement. With that caveat, Squared Away found three calculators ... that do a good job. They met our criteria of being reliable, free, and easy to use. Many other calculators were quickly eliminated, because they were indecipherable or created issues on the first try." (Squared Away Blog, by the Center for Retirement Research at Boston College)
Retirement Plans Are Leaking Money. Here's Why Employers Should Care
"If their retirement accounts are dwindling, older employees may not be able to retire when they want to. How problematic that is depends on the employer and its workforce management philosophy.... [If] an employer wants workers to stay until normal retirement age, pass along their knowledge and skills, and then leave so younger workers can move up, early withdrawals become more problematic." (Society for Human Resource Management [SHRM])
Nobody Knew Couples Budgeting Could be So Complicated
"[If] a couple's Income from Other Sources (such as Social Security benefits, pension benefits, or life annuities) is expected to decrease or cease upon the death of one of the individuals, the left-hand side of the Basic Actuarial Equation (the assets) can be overstated ... [and]the right-hand side of the equation (spending liabilities) may be understated.... [T]wo possible approaches ... [are] a simple approximate approach and a more complicated (but more accurate) actuarial approach." (Ken Steiner, FSA Retired)
How Do Distributions from Retirement Accounts Respond to Early Withdrawal Penalties?
"Crossing the age 59-1/2 threshold leads to a $1,600 increase in annual distributions from IRAs. People with birthdays that result in fewer months of penalty-free withdrawal in the calendar year in which they turn 59-1/2 have a much smaller increase in annual distributions between the years in which they turn 58-1/2 and 59-1/2. In contrast, those who turn 59-1/2 early in the calendar year see much sharper increases." (TIAA Institute)
Dynamic Retirement Spending with Small-But-Permanent Cuts
"[E]ngaging in a more rapid series of smaller -- but permanent -- spending cuts can be even more effective. For example, rather than cutting spending by 20% for 3 years after a market decline, if the retiree simply commits to trimming real spending by 3% (permanently) in any year that market returns are negative -- approximately the equivalent of forgoing an inflation adjustment during the down year, and a fairly trivial spending adjustment for most retirees -- the safe withdrawal rate rises by almost 0.5% (to more than 4.5%). With the large-but-temporary cut, the safe withdrawal rate only rises by 0.1%, instead." (Nerd's Eye View)
Annuities Offer Stability, Lump Sum Takers Say
"More than half -- 52 percent -- of lump sum recipients agreed that their budget would be more predictable if they'd chosen annuity payments from an employer pension or defined contribution plan ... Far fewer lump sum recipients -- 34 percent -- said it would be easier to pay for necessities if they had chosen monthly annuity payments instead of a lump sum ... The average lump sum amount ... for those who took a lump sum from the defined benefit plan was about $192,000. The average defined contribution plan balance at retirement was about $240,000." (
401(k) Distribution Rules: Frequently Asked Questions
"When am I eligible for a 401(k) distribution? ... What's a hardship distribution? ... When can I rollover a 401(k) distribution? ... Can I leave my money in my 401(k) plan after I terminate employment? ... When must I start taking Required Minimum Distributions from my 401(k) account? ... How are 401(k) distributions taxed? ... How are distributions of Roth 401(k) deferrals taxed?" (Employee Fiduciary)
Are You Being Too Frugal During Retirement? The Actuarial Budget Benchmark Can Help You Decide
"Now researchers are telling us that many retirees are being 'overly cautious' with their investment and spending strategies. [A] recent analysis ... shows, among other things, 'adults become less optimistic about future economic growth and financial health as they age and 'perhaps as a reaction to declining financial optimism, the average adult 60 years or older will trim their spending by about 2.5 percent every year, or by about 20 percent over a 10-year period.' " (Ken Steiner, FSA Retired)
[Guidance Overview] Time is Right to Contact Recordkeepers About Hardship Substantiation
"The IRS's openness to substantiation in a summary form will be welcome news to many administrators and plan sponsors. But accepting summary substantiation will require careful review by the recordkeeper and, even with that review, administrators and sponsors will have to rely on participants to maintain records.... Plan sponsors should consider whether the efficiency from reduced documentation is worth the potential for headaches in an IRS audit." (Proskauer's ERISA Practice Center)
Software Solutions to Calculate Safe Withdrawal Rates
"[No] financial planning software solution has ever been created to illustrate the safe withdrawal rate approach.... [In] part, it's because the original safe withdrawal rate research used very simple assumptions -- from a two-asset-class portfolio, to ignoring the impact of fees, and a fixed 30-year time horizon -- which just doesn't hold for a wide swath of retirees. To fill the void, though, two new software solutions have recently emerged for financial advisors, specifically to illustrate the safe withdrawal rate approach, and be able to model the impact of varying assumptions, from a wider range of asset classes, to the impact of investment expense ratios and advisory fees, and time horizons that may be longer or shorter than 30 years." (Nerd's Eye View)
Income Illiteracy May Favor Simple Annuities
"Asset allocation, the 4 Percent Rule retirement portfolio withdrawal mantra, return on asset classes, tax implications, Social Security strategies -- many of these concepts in retirement finance are lost on millions of retirees. But talking to retirees about investing all or a portion of their $200,000 nest egg into an income annuity generating $700 a month for the rest of their lives? It doesn't get much easier than that[.]" (
Social Security Retirement Benefits and Private Annuities: A Comparative Analysis
"This issue paper explains some key features of Social Security retirement benefits, focusing on program funding; benefit payments to retired workers, their spouses, and survivors; and benefit taxation. It then discusses key features of private annuities, including funding and payments, types and features, and taxation. In addition, this paper gives examples of the premiums needed to replicate Social Security retirement benefits and discusses the variables that affect the amount of annuity income. Lastly, this issue paper explains some of the risks of both the Social Security program and the private annuity industry." (U.S. Social Security Administration [SSA])
[Opinion] It's Harder Than You Think to Spend Down Your 401(k) Account in Retirement
"[P]eople seem to have a psychological attachment to their pile; they have spent a lifetime building it up and may be reluctant to draw it down. Second, people are fearful about end-of-life health care needs and want to be sure they have enough money to cover their expenses. Finally, people seem to have a desire to leave a bequest ... So, without some guidance, chances are high that retirees will deprive themselves of necessities. One way to help may be to put more emphasis on the Required Minimum Distributions[.]" (Alicia Munnell, in MarketWatch)
Retirement Lump Sums Being Depleted Quickly
"More than one out of five workers who accepted a lump sum from their employer-sponsored retirement plan have depleted it ... Of the individuals who opted for the lump sum, 62 percent had money left over from the withdrawal, 21 percent had depleted their lump sum and 17 percent didn't know or couldn't recall ... Those who reported depleting their lump sum said it took them an average of five and a half years to burn through the money." (
What It Takes for Financial Advisors to Specialize in Retirees
"[E]ffectively managing a retirement portfolio, and the distributions that occur from it, is about more than just managing the investments themselves. Because retirement portfolios also have to face sequence of return risk -- the possibility that even if the portfolio generates the desired long-term return, if it achieves that return with an unfavorable sequence, ongoing distributions could catastrophically deplete the portfolio before the good returns show up! As a result, the best strategy for retirement income isn't necessarily the one that produces the best return." (Nerd's Eye View)
Withholding Requirements for 401(k) Plan Distributions
"Normally, any taxable distribution is subject to a mandatory federal income tax withholding of 20%. However, there are certain circumstances when a participant can choose not to have the 20% federal income tax withholding from their distribution.... Periodic payments ... Nonperiodic payments ... Distributions sent outside the United States to nonresident aliens ... Eligible rollover distributions." (WithumSmith+Brown, PC)
Find the 'Goldilocks' Solution for Spend-Down During Retirement
"[Sequence of return risk (SORR)] is generally not as significant of an issue with those who use more dynamic spending strategies that periodically adjust for actual investment experience. It is more of an issue with individuals and their financial advisors who disassociate spending decisions from actual investment performance. Rather than having faith that such a decoupling approach will work ... an actuarially determined spending budget [can] be determined each year and that the resulting amount be used as another 'data point' in making spending decisions." (Ken Steiner, FSA Retired)
Dynamic Programming Methods in Retirement Planning
"Ultimately, it's still not clear that there's one 'right' way to do retirement planning. Whether it is Monte Carlo versus historical ... goals-based versus cash flow-based ... or dynamic programming versus non-optimizing approaches ... all can provide different insights, which in turn can help guide decision for clients given the risks and sheer uncertainty they face in planning for retirement. But in the end, if the whole point of doing financial planning is at least in part to come up with an actual plan for how to handle an uncertain future, dynamic programming provides a unique toolset that isn't available in today's traditional financial planning software solutions ... at least, not yet!" (Nerd's Eye View)
Are 401(k) Loans Double Taxed?
"Many financial experts believe that 401k loans are not double taxed. They say that the overall tax treatment of the individual is the same whether he/she takes a 401k plan loan or a loan from somewhere else. An equivalent amount of taxes would be required to pay back a loan from any other lender.... However, that does not change the fact that a participant appears to experience a tax on the principal portion of 401k loans that is more than double his/her incremental tax rate." (Lawton Retirement Plan Consultants)
[Official Guidance] Text of IRS Publication 590-B: Distributions from IRAs (PDF)
60 pages, for use in preparing 2016 returns. "You can make only one rollover from an IRA to another (or the same) IRA in any 12-month period regardless of the number of IRAs you own. However, you can continue to make unlimited trustee-to-trustee transfers between IRAs because it is not considered a rollover.... If an RMD is required from your IRA, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the RMD to you, or offer to calculate it for you.... For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan ... However, these distributions are taken into account when determining the modified adjusted gross income threshold." (Internal Revenue Service [IRS])
[Opinion] Continuing Saga of So-Called 'Safe Withdrawal Plan' -- Good News, Bad News
"[T]he good news in this research is that: it is a mistake to view portfolio withdrawals in isolation from other sources of income (as is the common practice), and risks retirees face in retirement can be mitigated by investing in guaranteed lifetime income sources and using dynamic rather than static spending strategies. The bad news ... is that Dr. Blanchett is even talking about utilizing safe withdrawal strategies with the implication that there are still financial planners out there who continue to use such strategies for their clients." (Ken Steiner, FSA Retired)
[Guidance Overview] (Mild) Relief for Safe-Harbor Hardship Administration
"The [memorandum to IRS EP employees] provides for some flexibility to employers and TPAs by allowing them to rely on summaries of information from participants. Employers and TPAs that currently require source documents to substantiate hardship distributions do not need to make any changes to their procedures. While they may want to consider whether collecting summaries might streamline their practices, their current practices assure that documentation is available upon an audit without having to rely on participants' recordkeeping abilities to satisfy any substantiation requests by the IRS." (Trucker Huss)

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