It has come to my attention that an overwhelming amount of people I speak to about their retirement plans simply don’t know they’re at financial risk. Many are simply unaware of the tax pitfalls that could easily be avoided had they just taken the time to educate themselves. That’s OK. But how do you know if you’re at risk? I came across this test that was put together by Ed Slott, one of America’s most renown experts in retirement planning. Going through this simple exercise will get you started thinking seriously about protecting your retirement money.
Instructions are simple: Answer “Yes” or “No” to each of the 20 questions. Give yourself 5 points for each “yes” answer, and five points for each “no” answer. When you’re finished, tally the total number of “yes” points and “no” points and find out your risk IQ- how much or how little your retirement savings are at risk.
1. Do you have most of your retirement savings in a company 401k), 403(b), or 457 retirement plan? ____Yes____No
2. Do you have company stock in your 401(k)? ____Yes____No
3. Is your retirement plan one of the largest assets you own? ____Yes____No
4. Have you recently left your company or retired, or will you be retiring soon? ____Yes____No
5. After you retire, will you be leaving your retirement account with your former employer? ____Yes____No
6. Will you be taking a lump-sum distribution from your company plan at any time? ____Yes____No
7. Will your retirement accounts savings pass according to the terms in your will? ____Yes____No
8. Have you named a trust to be the beneficiary of your retirement plan? ____Yes____No
9. Is your estate the beneficiary of your retirement plan? ____Yes____No
10. Will you be leaving your retirement assets to your spouse? ____Yes____No
11. Have you put off instructing your beneficiaries what to do- and what not to do- with your retirement plan when they inherit? ____Yes____No
12. Do you want to be able to control the payouts on your retirement account(s) after your death to prevent your beneficiaries from squandering the money? ____Yes____No
13. Will you be inheriting a retirement account from anyone? ____Yes____No
14. Are you confident that your bank, broker, or mutual fund company will have all the necessary documentation on your retirement account that your beneficiaries will need? ____Yes____No
15. Are you unsure of the exact amount the IRS requires you to withdraw from your retirement account, and when? ____Yes____No
16. Do you own a life insurance policy? ____Yes____No
17. Will you be rolling cash, stock, or other property over from one retirement account to another? ____Yes____No
18. Has it been more than a year since you last updated the beneficiary forms for every retirement account you own? ____Yes____No
19. Will you need to tap into your retirement savings before you reach age 591/2? ____Yes____No
20. Have you heard of a ROTH IRA but taken no steps to find out more or set one up yet? ____Yes____No
TOTAL POINTS ____Yes____No
The total number of “yes” points represents the approximate percentage of your retirement savings that will probably go to the U.S. Treasury, and the total number of “no” points represents an approximation of how much you and your family will likely keep.
This test was given out by Ed Slott to tens of thousands of consumers, tax professionals, and financial advisors over the years at his seminars and workshops and most find their retirment accounts to be woefully exposed to extreme taxation. If this holds true for you as well, consider a free consultation with an expert from Ballheim Financial LLC. Ballheim Financial LLC is a registered investment advisor in Davenport, Iowa. For more information on why investors are flocking to independent registered investment advisors as oppose to the traditional brokerage model, visit “Working with an RIA” under the “Our Approach” tab at www.PureIndependence.com.