A new report from the Aegon Center for Longevity shows that 49 percent of people in the Americas cite running out of money as their main retirement concern. In an era where people have the potential to live much longer than previous generations, this may not be all that surprising. After all, planning for 10-15 post-retirement years is far less daunting than planning for 25-30. With these additional years, another concern arises: declining health. Once again, our ability to live with advancing or chronic illness has improved greatly, but our mechanisms for planning how to do so have not kept pace. A crucial step is developing a holistic plan for retirement.
What is a “holistic” retirement plan
Call it holistic, call it robust, call it comprehensive…the adjective doesn’t much matter. What we mean is a plan that considers all eventualities that come with advancing age. A retirement plan should account for the years after you exit the workforce, but must also be shored up by additional planning should you be forced to navigate illness or incapacitation, and also for your eventual passing. Enter the estate plan, an essential complement to a complete retirement plan.
An estate plan is different from a retirement plan in that the latter is broader and, if well-designed, encompasses the former. A basic retirement plan is something that can be put together with the help of a financial advisor, but only a qualified estate planning attorney can assist with designing an estate plan.
What does a holistic plan include?
The specifics of your individual retirement and estate plans will vary, and—as mentioned above—must be designed in consultation with an attorney. Nonetheless, some basic features are near universal. All estate plans contain a will, and any plan worth its weight also includes a living trust (or similar) and properly-filed power or attorney documents.
The purpose of your estate plan is to protect your assets in the event of death or an incapacitating event. In order for this to be achieved, an effective plan accounts for all of your belongings, including real estate, vehicles, valuables, cash, and any investment accounts you may hold. In most cases, this will include an IRA and a 401(k), both of which are affected by the newly-introduced Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019.
How will the SECURE Act impact your retirement?
To put it in as few words as possible: profoundly. Should the SECURE Act pass—and by all indications it will—rather than being able to “stretch” the distributions from an inherited IRA over a prolonged number of years based on their life expectancy, most beneficiaries will be required to withdraw the entire balance of an inherited IRA balance within 10 years of the death of the IRA’s original owner. Because beneficiaries will enjoy a smaller window of tax deferred compounding growth, careful planning becomes all the more important.
Not only IRAs will be affected; so too will all benefit plans with balances including 401(k), 403(b), 457(b), 401(a), profit-sharing plans, ESOP, Cash Balance Plans and lump-sum distributions from defined benefit plans.
Under the 10-year limitation, managing distributions for designated beneficiaries is crucial. This is no easy task, as determining ideal timing is complex and dependent on such factors as business losses, charitable contributions, other income, and a range of additional factors. An experienced attorney is your best resource for determining how to proceed. Call our office with your questions regarding this complex topic. During a consultation, we can explore how planning options like our Standalone Retirement Trust can help your beneficiaries get the most out of the hard-earned assets you leave for them.
Contact Attorney James M. Miskell, P.C.
Estate planning attorney James M. Miskell and his team at the Estate Planning Law Group of Georgia is happy to discuss your estate planning needs and help you protect your assets. Contact us using the brief form below, and we’ll get in touch with you shortly!