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Distributions - misc

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[Guidance Overview] Puerto Rico Treasury Department Issues Post-Hurricane Rules for Qualified Retirement Plan and IRA Distributions and Loans
"As a result of [Administrative Determination No. 17-29], employers must decide whether to amend their plans to incorporate these special rules. Notably, in the event that the employer decides to amend the plan accordingly, AD 17-29 is silent as to which procedure a participant must followed to receive a favorable tax treatment, in the event he/she has already received Eligible Distributions within the Eligible Period prior to the effective date of AD 17-29." (Littler)
New Tax Reform Bill: Major Changes to Executive Compensation Lead Impact on Benefits and Compensation Practices (PDF)
9 pages. "Employers that have used nonqualified deferred compensation plans to attract and retain highly compensated employees ... would need to consider alternatives to achieve their goals ... With the possible exception of incentive stock options, there would appear to be no reason for employers to grant stock options or stock appreciation rights.... [R]ule changes would ease the ability of employees to take hardship withdrawals and would reduce some of the complexity in administering hardship withdrawals.... As a taxable contribution, [Dependent Care FSAs] would be effectively eliminated as they would have no value to employees.... The Tax Bill does not eliminate Health Care Flexible Spending Accounts." (Mazursky Constantine LLC)
[Opinion] Common Misperceptions About Using the Actuarial Approach for Personal Financial Planning
"[The authors] have concerns about stochastic models that promise higher levels of spending without properly quantifying the additional risk. [They] also have concerns about blindly relying on the results of these models, particularly over extended periods of time without adjustment. And while no one knows what future investments will earn, we do know how much insurance companies are currently charging to provide income for life based on life annuity quotes.... [T]his 'known' market pricing information can be useful in developing a low-investment-risk Actuarial Budget Benchmark that you can use in combination with the other approaches you are using to make better financial decisions." (Ken Steiner, FSA Retired)
Structuring Your Retirement Portfolio for Your Income Needs
"The first aspect of [a] three-pronged approach to generating retirement income is creating a plan.... [Y]our next step should be to determine your portfolio allocation. Lastly, you'll make a plan for withdrawing from your portfolio in retirement. The portfolio allocation step is all about choosing the right mix of investments. Here's a guide for how to approach it." (Charles Schwab)
Bob Kaufman Retires After 20 Years of Writing Railroad Retirement Benefits Q&A Column
"Since December 1, 1997, I have posted more than 1,000 Q&A's in my Q&A column on BenefitsLink, and an estimated 5,000 questions I've answered by direct e-mail. Times have changed, and the Railroad Retirement Board has developed an excellent web site, which you can use to find answers to questions about the Railroad Retirement System. I just turned 78. I think it's time to enjoy my retirement and my six grandchildren!" [Send Bob a note of thanks or congratulations! -- Editor] (Robert S. Kaufman on BenefitsLink)
Spousal Rollover Rules for Inherited Roth and Traditional IRAs
"Ultimately, the good news is that spousal beneficiaries have the option to make either choice, and even have flexibility about the timing -- allowing a decision to maintain an inherited stretch IRA for the spouse initially, and completing a spousal rollover later (after he/she turns age 59-1/2). Nonetheless, it's important to carefully consider the choices and trade-offs... especially since a spousal rollover, once completed, is irrevocable and cannot be undone after the fact!" (Nerd's Eye View)
Workers Want Lifetime Income But Aren't Sure How to Get It
"When it comes to retirement income, 62 percent of Americans say they would pick $2,700 a month for the rest of their lives and 30 percent say they would prefer $500,000 all at once... [O]nly 16 percent say they're very familiar with annuities and 51 percent say they're not familiar with them.... Employers offering retirement plans should be aware of this disparity and try to use it to inform how they talk about saving for retirement and spending money in retirement[.]" (Bloomberg BNA)
Five Important Ages for Retirement Planning
"At age 50, your employees will become eligible to save more the standard amount in their 401(k) and IRA accounts ... By waiting until the age of 59-1/2 to take a withdrawal, your employees will get to keep an additional 10% of their money.... Your employees will be able to sign up for Medicare during a seven-month period starting three months prior to their 65th birthday.... Baby boomers born between 1943 and 1954 will be eligible to begin claiming the full Social Security benefit they've earned at age 66.... Whether it's needed or not, they'll be required to take distributions from their traditional IRAs, traditional 401(k)s and Roth 401(k)s after age 70-1/2." (Voya)
Over a Quarter of Seniors Say Retirement Is Worse Than Expected
"The good news is that the reasons people gave for being unhappy with retirement were largely financial -- and therefore preventable. Of the 28% percent of retirees who are unhappy, 78% cited income as a reason, and 76% blamed an increased cost of living.... [T]here's a disconnect between expectations and reality for many unhappy retirees, particularly because they overestimate how much they'll receive in Social Security benefits and underestimate how much they'll pay in healthcare costs." (Motley Fool)
Funding Your Retirement
"When it's time to tap savings, some use the income their portfolio generates to support spending, or don't have a plan to use all sources of return and to use their assets in a coordinated way to generate the cash flow desired. That brings us to the final step of retirement planning--distribution.... Aim to cover essentials with predictable income sources ... Fund discretionary expenses with fluctuating income ... Generate cash flow when you rebalance your portfolio." (Charles Schwab)
[Guidance Overview] New Law Provides Additional Relief for Hurricane Victims (PDF)
"[W]hile the Act increased the limit on nontaxable loans to $100,000 or 100% of the participant's vested account balance, it did not similarly increase the ERISA loan limit. As a result, a plan loan equal to 100% of a participant's vested account balance would not be considered a taxable distribution but could be a prohibited transaction, if the plan administrator does not obtain additional security for the loan outside the plan." (Prudential)
A Tax-Advantaged Way to Distribute Employer Stock from Retirement Plans
"[T]he net unrealized appreciation distribution strategy ... allows for capital gains treatment of any embedded appreciation, rather than having it taxed as ordinary income.... A key requirement here is that the distribution must be considered a lump-sum distribution." (Morningstar Advisor)
[Guidance Overview] Hurricane Legislation Grants Retirement Plan Relief
"Plan sponsors must inform participants of their options under the hurricane relief provisions. IRA and employer plan service providers should evaluate forms, systems, and workflow processes to support qualified hurricane distributions, loan exceptions, and potential repayment and rollovers. For example, the legislation states that the [notice] given to recipients of eligible rollover distributions need not be provided with a hurricane-related distribution but other distribution consent and notice requirements still apply." (Ascensus)
Better Budgeting with the IRS RMD Table?
"[W]hile the IRS RMD [strategic withdrawal plan (SWP) may be a tad simpler than the Actuarial Approach, ... the more exact actuarial calculations is definitely worthwhile and can improve retirement outcomes even more.... [1] The IRS RMD SWP is quite conservative; [2] SWPs frequently do not coordinate well with other sources of retirement income; [3] SWPs generally do not adequately recognize non-recurring expenses in retirement and do not anticipate different rates of increase in future recurring expenses; [4] SWPs generally don't permit 'budget shaping' to meet individual retirement goals, and [5] SWPs generally don't do a particularly good job of helping you with pre-retirement planning." (Ken Steiner, FSA Retired)
[Official Guidance] Text of 2017 IRS Form 4972: Tax on Lump-Sum Distributions (PDF)
"Use Form 4972 to figure the tax on a qualified lump-sum distribution you received in 2017 using the 20% capital gain election, the 10-year tax option, or both. These are special formulas used to figure a separate tax on the distribution that may result in a smaller tax than if you reported the taxable amount of the distribution as ordinary income." (Internal Revenue Service [IRS])
[Discussion] Actuarial Adjustment of QPSA Benefit Due to Missed Payments
"We have a plan that has not been able to locate the surviving spouse of a deceased terminated-vested participant for a number of years. The TV participant would have turned 65 in 2015 (when QPSA payments would have started) and we are wanting to begin distribution of the QPSA for the spouse soon. The plan does not allow for retroactive payments. Would the QPSA benefit due to the spouse be actuarially increased to 2017 based on the participant's lifetime or the spouse's lifetime?" (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)

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