Common IRA Mistakes to Avoid
IRAs can be great retirement planning tools, and may be one of your most significant assets. However, it is easy to make a mistake in handling your IRA. Here are four common IRA errors to avoid:

1. Double Distribution
   You reach age 70 ½ in 2004. In theory you may wait until April 1, 2005 to take your required minimum distribution (RMD) for 2004 from your traditional IRA. But you must still make your withdrawal for 2005 by December 31, 2005. If you wait until April 2005 to make your 2004 RMD withdrawal, you will have a "double-distribution" in 2005, and two withdrawals in one year may push you into a higher tax bracket*. Work with a financial professional to determine the best time to take your first RMD.



2. Incorrect Beneficiary
   You may have established your IRA several years ago. Have you updated your beneficiary designation as your circumstances changed? Failure to update your beneficiary designation may mean that your retirement assets are left to the wrong people. It is a good idea to review your IRA beneficiary designations regularly.



3. Naming the Estate as Beneficiary
   When you name your estate as beneficiary of your IRA, it becomes an asset of your estate and must go through probate. This is an unnecessary expense. Even worse, the entire account balance may have to be distributed to the estate by the end of the fifth year after your death. This rapid payout may cause a large tax bill, plus the loss of future tax-deferred growth for your beneficiaries. Whenever possible name individuals, rather than your estate, as your IRA beneficiaries.



4. Leaving a Retirement Plan with a Former Employer
   When you leave an employer, you typically have the right to roll over your entire vested balance into an IRA. There are three significant advantages to be gained by employing this strategy: 1) you can access a much wider array of investment options, allowing you to manage those assets more effectively; 2) your beneficiaries may be able to take distributions over their lifetime, thereby allowing for a longer period of tax deferral, even after your death; and 3) you can avoid the 20% mandatory withholding for distributions if you roll over your retirement plan to an IRA To ensure that you are making the right choices, review your situation with a Financial Advisor at Space Coast Credit Union on a regular basis.

For more information or to schedule an appointment, call (321) 752-2222 or (800) 447-7228, ext. 9360, or email inquiries to invest@sccu.com.

There is no cost or obligation for your meeting.

The information on this page is for educational purposes only. SCCU is not engaged in providing estate planning or other advice. Please consult with a competent estate planning professional regarding any specific estate planning questions.