New York-based CPA Ed Slott doesn’t get to spend much time at home. He’s too busy traveling the country, teaching advisors and consumers alike about IRA distribution strategies that are the key to effective wealth transfer.

From January through August of this year, Slott completed more than 60 speaking engagements in 23 states and Washington, D.C. “I love what I do. Without that commitment and passion I could not possibly keep the travel schedule that I do,” Slott says. “But most of all, what keeps me going is simply the ability to challenge the status quo and transform the retirement industry, by creating a new breed of competent advisors that consumers can rely on for their financial security.”

Slott says most consumers have low expectations of their advisors because they are unaware of the fantastic opportunities available to retain, grow and pass on their retirement savings by capitalizing on the numerous benefits buried in the tax code. “Most advisors are unaware of these as well. I am on a mission to educate the consumer to expect more from their advisors and to educate the advisors to earn the business.”

Between trips, Slott took a few minutes to answer some questions from Senior Market Advisor .

Senior Market Advisor: Can you briefly put into context the type of opportunity that is available today for advisors to help clients with IRA rollovers?

Ed Slott: I call this the ” perfect storm of IRA opportunity ” for financial advisors. There are trillions of dollars in retirement accounts right now and millions of people who have to take distributions from these accounts ? and this trend is just beginning. The money is just pouring out from every segment of the population and more people need to rely on more advisors than any other time in history.

Most of the money clients have today is in retirement accounts. But this money cannot stay stagnant forever. Because this is tax-deferred money it eventually must be withdrawn, generally when three events happen: Death, reaching age 70? 1/2 or when people retire or change jobs. All three of these events are happening in record numbers right now, and this is just the tip of the iceberg. The numbers of people will only keep on growing rapidly for at least the next 15 to 20 years. What an incredible opportunity for advisors who pick up on this and take advantage of it now.

More people than ever before are searching for advisors with specialized knowledge in retirement distribution planning. The pendulum has swung from the accumulation phase to the distribution phase. Record numbers of people are looking for an exit strategy for their money and they have no problem moving money from their current advisor to a new advisor who has the knowledge and competence in distribution and estate planning for retirement funds.

SMA: Do you think advisors generally know enough about strategies to protect their clients’ wealth from unnecessary taxes, and are they doing a good enough job of employing these strategies in applicable situations?

Slott: No, they certainly don’t. Much less than 1 percent do, but that spells tremendous opportunity for advisors willing to invest their time in learning these key planning strategies and tax rules. The few advisors that do possess this knowledge are already seeing an exponential increase in business as well as clients desperate to work with them. Clients are beginning to realize that it is not how much they accumulate, but how much of that accumulation they can keep and pass on to loved ones. They are moving record numbers of retirement assets to advisors who can help them take advantage of the tax rules and keep more of their money in the family.

SMA: What can advisors do to better prepare and educate themselves in this area?

Slott: Advisors need resources and specialized knowledge if they want to attract this wave of retirement money. They need to invest in their education. People want to know that you have at least one book on your shelf on this topic before they turn their life savings over to you. If you want to hold yourself out as an expert, you must have access to the knowledge. This means you have to read and learn as much as you can about retirement distribution planning.

There is no doubt that this specialized knowledge is attracting money and lots of it. I know because I have taught more advisors in this area than anyone in the country and I hear the success stories. The advisor who invests the most in his education always brings in the most business. The new advisors are selling knowledge first, and then product.

Attend any program you can on this topic, even at your local professional association. You will always learn something and meet someone who can help you tap into this market. The key is learning and catching the wave of this new retirement money.

Also, read all you can on this topic. Newsletters are filled with the latest rulings, tax law changes and planning ideas. I highly recommend reading “Life & Death Planning for Retirement Benefits,” by renowned IRA guru Natalie Choate. This is the bible on IRA distribution planning and every serious advisor should have this on his bookshelf.

The bottom line is this: The more you learn on this topic, the more assets you will attract. Learn all you can and bathe yourself in this area. Every dollar you invest in this education will pay you back a thousand times over.

SMA: You mentioned at MDRT’s Boomertirement summit that the ever-advancing wave of retiring boomers is fairly familiar with putting money in, but not at all familiar with how to take it out. What kind of effect is the boomer wave having on rollovers, and do you think advisors are doing enough to lead them from accumulation into the distribution phase?

Slott: That is absolutely correct but many of these boomers are becoming more aware that they need a specialized advisor to help them with their “exit strategy,” a term I use that consumers seem to understand better than “retirement distribution planning.” I tell them that although they keep putting money in, they need a plan to get it out because it is the way that you take it out (either during life or after death) that will determine how much is kept and how much goes to the government.

Many boomers have already seen their parents make this mistake and lose upwards of 60 percent of their retirement savings after death and are determined that this does not happen to them. Once again, this 78 million-strong boomer market is just one segment of the population that will be engaging advisors who can craft an exit strategy for their retirement funds. Most of the new rollover money is coming from boomers, and advisors with a distribution plan will win these rollovers from other, less-informed advisors.

We hear stories all the time from consumers who have reached what I call “crossover point,” meaning they realize they know more than their advisor and they want to move to an advisor who knows more than them. They want competent advisors to do their planning.

SMA: You are a big proponent of the Roth IRA. What are some of the top reasons to move money into a Roth account?

Slott: The Roth IRA is the way of the future. This is an opportunity our parents never had – a chance to build a retirement fund that will be tax-free forever. The Roth IRA removes the uncertainty of what future tax rates will be because you cannot beat a ZERO percent tax rate.

This means that similar to life insurance, clients have to see the long-term benefit of paying a relatively small amount of tax now for a tax-free windfall forever, both for them and their family.

I believe tax rates from here on in can only go up due to a plethora of financial crisis that are about to hit tens of millions of people as they age. As tax rates increase, the value of a tax-free Roth IRA and Roth 401(k) will be at a premium. Advisors should do all they can to encourage Roth IRA and Roth 401(k) contributions and Roth IRA conversions. The future retirees will not want to pay 70 percent in taxes on their retirement funds, especially when they are no longer working.

SMA: How does the stretch IRA process rate as a wealth-transfer tool?

Slott: The stretch IRA is how future beneficiaries will parlay their parents’ and grandparents’ IRAs and Roth IRAs into a family fortune that will pay them for the rest of their lives. Once a beneficiary inherits, that beneficiary can keep the account growing tax-deferred (or even tax-free with a Roth IRA) over their entire lives. But the account has to be set up so that the beneficiary can stretch; that is, to extend the tax deferral over their lifetimes. The way to do this lies in the IRA beneficiary form. The beneficiary must be named on the IRA beneficiary form in order to guarantee the stretch IRA. Also, if the funds are currently in a company plan, clients generally should roll those funds to IRAs since the stretch feature is often not available from the company plan.

Once the funds are in an IRA and the child or grandchild is named on the IRA beneficiary form (as opposed to the will), they only have to withdraw small amounts each year and the rest builds over their lifetime. This is the way to true wealth because the money is being kept out of reach of the government for so long that the government can never catch up and a fortune is built for the family instead of Uncle Sam.

Other than life insurance, the stretch IRA is the most powerful and tax-efficient way to leave beneficiaries millions more than their parents ever had.
Click here to download a pdf (7 MB) of the entire IRA/Stretch Strategies special section.

The section includes:

  • Ed Slott delivers the goods
    Interview by Brian Anderson
    The nation’s foremost IRA rollover expert tells adivsors how they can capitalize on “the perfect storm of IRA opportunity.”
  • The exploding $16 trillion IRA market
    By David F. Royer
    How the right tools and training in IRA distribution can put you in position to dominate a very ripe stretch market.
  • An annuity alternative for legacy planning
    By Charles D. Osmond, JD, CLU, ChFC
    For clients who want an annuity’s legacy option to be as effective as possible, check out the capabilities of a non-qualified stretch annuity.

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