Retirement Accounts: How To Maximize

Managing your accounts well can also help you increase the value of your savings. The suggestions below may help.

Consolidate Accounts

If you have more than one retirement account, consider consolidating them. This may make it easier for you to manage your investments and cut down on fees and paperwork. Be careful though. In the case of IRAs, it could actually be better to have multiple accounts if your think you might need to borrow from them at some point. (See Getting Money Out Of Your IRA.) Also make sure not to mix any "rollover" or "conduit" accounts with any others.

Minimize Fees

Even if your retirement account is "self-managed," the assets in it will still be placed with a trustee that will probably charge various fees, including establishment fees, annual fees, and transaction fees. Try to avoid trustees that charge fees as a percentage of your account or per transaction. A flat annual fee may be less expensive.

Don't Take Possession Of Rollover Funds

If you roll over or transfer funds among retirement accounts, always make sure the money goes directly from one account to the other.

If you take possession of the funds, you may be subject to income taxes and a 10% penalty tax on the withdrawal. In addition, the trustee who pays the funds out to you from a non-IRA plan may be required to hold onto 20% of the amount as income-tax withholding.

Designate A Beneficiary

Most people should designate a beneficiary on their retirement accounts rather than let the money be passed through their estate under the terms of their Will. By designating your beneficiary, the money will avoid probate. Also, your beneficiary will be able to withdraw from the account soon after your death.

Even with a beneficiary, the amount of your IRA will still be counted as part of your gross estate for estate tax purposes... unless the money is left to charity. Tax-deferred accounts are the ideal charitable gifts since no one has to pay taxes on them -- neither the estate or the charity. Leaving a tax-deferred account to a charity, and other non-deferred assets to your heirs, increases the overall amount received by everyone - including heirs and charity.

Keep Careful Records

Make at least one folder for documentation related to each retirement plan account. If it's an account in which you manage the investments, such as an IRA, it will make your life easier when it comes time to preparing your taxes if you use multiple folders, including one for each security you buy for the account.

Continue To Monitor Your Accounts

Even after you retire or go on disability and start drawing on your account, you should continue to monitor your accounts carefully.

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