Suggested
Client Letter—Checkup for IRAs
Dear Client:
Your retirement plan savings (that is, qualified plans and IRAs) are
important to your financial well-being for several reasons. Right now,
they are one of the last places you can accumulate income without
currently paying tax. The power of compounding pretax dollars makes a
retirement plan one of the most powerful investments you have. Think of
it as an interest-free loan from the government.
When you reach retirement, the assets in your retirement plans may be a
significant portion of your savings. Therefore, it is important that you
do everything you can to get the most out of one of the best investments
you have.
Generally, when you begin to withdraw from your retirement plans, you
will be subject to tax on the distributions. (If you made after-tax
contributions to your plan or IRA, a portion of each distribution will
be tax free. Also, special rules apply to Roth IRAs.) If your
distributions begin prematurely (before age 59 1/2), you may be hit with
the penalty.
When you reach age 70 1/2 (or in some cases, retire), you must start
withdrawing a minimum amount from your traditional IRAs each year.
Distributions from Roth IRAs are not required during your lifetime.
When you die, the beneficiary designation in effect at the date of
death will determine not only who gets the retirement plan assets but
also how quickly your account must be paid out to your beneficiary (and
therefore, how quickly the benefits of tax deferral are lost).
Your retirement savings may be critical for you and your dependents’
future well-being. With planning now, you may be able to avoid penalty
taxes when you take distributions. You may also choose a beneficiary
that will maximize post-mortem planning opportunities and minimize the
amount your heirs are required to withdraw after your death. I would
like to visit with you for a “check-up” of your retirement plan to make
sure that you are doing everything available to get the most out of it.
I will call you soon to discuss what you can do now to maximize your
retirement plan’s value.
Sincerely,
Firm Name
