THE SEVEN MOST COSTLY MISTAKES YOU CAN MAKE WITH YOUR IRA !

By: David J. Tananbaum, Enrolled Actuary

Video By: Ed Slott: Premier IRA Expert

You have worked hard for many years to accumulate a large IRA, having one IRA rollover to another as you changed jobs, keeping track of your savings, and it’s about time to retire, you decide to transfer the proceeds to your own bank account for safekeeping.

WELL, you have just triggered a taxable event, if the IRA distribution is in your account for more than 30 days per year.

Unintentional mistakes can cost you a fortune, says Ed Slott, CPA premier IRA expert. It is imperative to learn IRA distribution rules, and to understand IRA distribution rules, if you are to avoid making costly mistakes with your IRA.

           Here are the Top Seven Mistakes the average participants make with their IRA Rollover. These mistakes can be avoided with a qualifed Rollover Advisor prior to Rollover to your IRA.:
7. Making inappropriate spousal rollovers. Don’t Rollover your IRAto your spouse IRA, unless you receive expert advice otherwise, as it might trigger a 10% premature distribution if she is less than 59 ½ years of age.
6. Maximize your Spousal IRA deduction
It is possible that the spousal IRA may be fully deductible as long as the couple’s adjusted gross income is below $150,000 for the year.
5. Maximize IRA “catch-up” contributions
Remind clients over 50 that they should not forget IRA “catch-up” contributions, currently $1,000 in 2006. They should also know that most 401(k) plans allow for catch-ups of an additional $5,000 in 2006. “Catch up” contributions can be key to building your IRA.
4. Taking the wrong RMD
Go to an expert IRA tax specialist to compute the correct Minimum Distributions required after you attain age 70 ½. If you miss making minimum distributions, the tax penalty is 50%, and it increases to 100% in the following year. Understanding IRA distribution rules is imperative. You can see how costly the wrong minimum distributions can be. IRA distribution can be confusing. Make certain yourminimum distributions are competently calculated, and that the IRA distribution rules are followed before making an IRA distribution.
3. Maximize your IRA contributions limits
In 2006, the contribution limit for an IRA , or, Roth IRAincreases to $4,000.00
2. Name a Beneficiary
Avoid IRA distribution of the IRAassets to the owners’ estate by listing beneficiaries, updating designations and coordinating them with estate planning documents. Having an IRA distribution made to an estate could forfeit dozens of years of potential tax deferral for the beneficiaries.
1. “Stretch” Your IRA with the assistance of an IRA expert.
The “Stretch IRA” allows non-spouse beneficiaries to maximize IRApayouts over their life expectancy—if they know how it works. Again, it is imperative to know the IRA distribution rules. This plan can also allow non-spouse beneficiaries to extend distributions from the account over their own lifetimes, after the owner’s death.