Retirement Plans

The changes to the federal tax laws make this a good time to look into the attractive possibilities for financing your own retirement.

Moreover, there is now greater portability to move your retirement money among a variety of plans. This is a boon to employees who have worked for a variety of employers and have different kinds of plans. Now they can roll them over more easily to one employer’s plan or an IRA.

For self-employed workers and others using such retirement vehicles as SEP-IRAs and SIMPLE IRAs, restrictions have been lessened and the plans generally permit you to save more and have greater flexibility to roll the accounts over.

Another recent phenomenon has been the rise in reliance upon 401(k) plans from private employers. These plans offer you more control and flexibility than traditional defined-benefit pensions. While it’s not possible to entirely protect your retirement plans from economic downturns, having a wide variety of retirement vehicles—IRAs, 401 (k)s, and traditional pensions—might lessen risk by increasing the diversity of your holdings.

What does all this mean for your estate plan? These retirement accounts will have their own beneficiary designations (see chapter 3 transferring property without a will) that will determine how quickly they must be paid out after your death, as well as the tax consequences. You need to take these factors into account when crafting your plan with your lawyer.

Plan Now

Older Americans have mostly small estates, often poorly organized. Too many widowed spouses are left impoverished, often by poor estate planning. Clearly, many older Americans need to combine estate planning with retirement planning, money management and other devices that will help them maximize what they have.