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Extreme Rollover Makeover

Learn how one NAIFA member helped a widowed client transfer her IRA assets and save thousands of dollars in taxes.

By Bret Bussanmas

The situation: A 43-year-old widow approached Jim Bardin, CLU, ChFC, a business consultant with Principal Financial Group and member of Tampa-AIFA (Fla.). She needed help transferring retirement assets of nearly $700,000 from her late husband is accounts, who was 73 when he died.

Another financial professional had advised the widow to roll her husband’s retirement plan assets into an IRA in her own name and then take a 72(t) distribution that would require a fixed monthly income until she was age 59½. However, this option left the widow with a high required minimum distribution, which she wasn’t sure she would need. It also left her no flexibility for taking unscheduled withdrawals if needed in the future. If she were to take unscheduled withdrawals in the future, she would incur a 10 percent IRS penalty on all distributions taken from the beginning.

The solution: Bardin, who had received IRA training from The Principal, which included a workshop by IRA expert Edward A. Slott, CPA, had learned of an often-overlooked IRA strategy that was well-suited for this client’s situation.

Bardin advised the widow to move the retirement plan proceeds into an inherited IRA, which would allow her to take a much lower required minimum distribution based on her life expectancy—not her late husband’s. In addition, the widow would not be assessed a 10 percent penalty and could take additional lump-sum withdrawals if needed prior to her attaining age 59½. The client enthusiastically accepted Bardin’s suggestion.

The success: The inherited IRA gives her a great deal more flexibility in how she takes income and saves her thousands of dollars in penalties on any additional withdrawals she takes over the next 16 years.

Bret Bussanmas is vice president of marketing and distribution for the broker-dealer company of the Principal Financial Group, in Des Moines, Iowa.

Insurance issued by Principal Life Insurance Company. Securities offered through Princor Financial Services Corporation, 800/247-4123, member SIPC. Princor® is a member of the Principal Financial Group ®, Des Moines, IA 50392. Jim Bardin, Principal Life Financial Representative, Princor Registered Representative.
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