4. Not beginning the required distributions on time. You are required to begin taking the minimum required distribution ("MRD") by April 1 of the year following the year in which you attain the age of 70 ½. Making this withdrawal is your responsibility. It is not the responsibility of the broker or mutual fund or investment advisor who holds the IRA assets. They may remind you as a courtesy but it is your responsibility to handle this. It is also your responsibility to determine the correct MRD. If you have multiple IRA's you may take the entire MRD from only one of them if you chose.
If you wait until the last permissible time, that is, before April 1 of the year following the year in which you attain age 70-1/2 to begin withdrawals, you will have to take two withdrawals in that year. It may be wise to take the first withdrawal in the year in which you attain age 70-1/2. That way, it may be taxed at lower brackets. Deferral is not always the best policy.
5. Being a prisoner of the form. Pre-printed beneficiary designation forms often give you a three inch single line to name your beneficiary. Don't feel constrained by this. Don't decide who gets all of the assets in your retirement plan based on what can fit on the line. You can always attach a sheet of paper spelling out exactly how the benefit should be distributed. If your IRA administrator doesn't like it, there are plenty of others ones who will. Move the account.
6. Not knowing what forms of distribution the plan permits. Planning for a stretch-out of IRA payments to your kids or grandchildren is useless if the IRA custodian's account agreement provides for a lump sum pay-out on your death. Not all IRA's include all the options permitted under the law. Do you know what yours allows?
7. Not keeping copies of your account agreement and beneficiary designations. These documents should be given the same care and safe-keeping as your will and power of attorney. These are the documents that will determine your rights and your beneficiaries' rights to receive the assets in these accounts. Many people don't even know who their beneficiaries are. Your will has no effect on who gets these plans if you've designated a beneficiary.
You can't rely on the financial institution's records. Do you know how many mergers and takeovers there have been in this industry? Stories abound of whole truckloads of records carted away and discarded. With personnel changes every few months, your records are easily "lost." Keep your own records.
Tune in next week for the conclusion.