Setting up an Individual Retirement Arrangement (IRA) for your retirement can be a good investment, but it’s not a simple process. Watch out for these common mistakes from the start:
- Not getting professional advice – Don’t try to do it on your own. Accountants and financial planners, have studied the complex financial and tax rules for retirement vehicles.
- Naming the wrong beneficiaries – or not naming any at all. Making your minor child a beneficiary will require a court-appointed guardian to manage the money until the child turns 18. If you fail to name a beneficiary, it is likely the IRA will become payable to your estate upon your death. This unnecessarily subjects the IRA to estate taxes.
- Confining yourself to the form – Most account agreements allow little space in which to name more than one beneficiary. Attach a sheet of paper with the information of all beneficiaries and exactly how you want the account to be distributed.
- Thinking your financial institution keeps records of everything – In this age of mergers and acquisitions, who knows where your records could be? Keep copies of your account agreement and beneficiary designations, and let your family know how to find them.