Last week we brought you part one of IRA guru Ed Slott’s thoughts on IRA rollovers, taxes and the educated advisor. But as you begin talking with clients and fielding their tax questions, there’s something else to keep in mind: the most common IRA mistake.
According to Slott, this is one mistake that’s made far too often and, quite frankly, should never be an issue. Read on to find out Slott’s thoughts on the most common IRA mistake, becoming an IRA expert and one more tidbit on being educated about IRA rollovers.
SMA: What are the most common IRA mistakes advisors need to avoid?
Slott: Not checking beneficiary forms. Oh, they think, that’s somebody else’s job. But it shouldn’t be. As the advisor you need to be on top of those life changes of your clients — life, birth, death, marriage, etc. All of those have to be changed. People don’t understand that the beneficiary forms can trump the will. You can imagine the problems that occur if, say, an ex-spouse is the beneficiary, and you don’t find that out until the death of a loved one.
SMA: I’ve heard you make doctor analogy when referring to IRA experts.
SLOTT: Yes. You have to put yourself out there as a specialist. The doctor analogy is a good way to look at it. Your GP is great, but he’s not a specialist. He’s not a cardiologist, a urologist, a neurologist. IRAs are different than other assets. They are distributed differently in life and after death. Average advisors make the mistake of always thinking product. But if you do the planning, the products will come.
SMA: What’s the worst thing that happens if an advisor is not educated on IRA rollovers?
SLOTT: If the advisor’s not educated, the public is underserved, the advisor’s focused on making money and what you wind up with is a tax hit. That’s where you really see the problem. Think of it like a sporting event where you have a first half and a second half. The score at end of game is the key. You can make money, but what will you get taxed? What will you have at the end of the game? That’s the key.
For a more detailed account of our discussion, keep a lookout next month for the April issue of Senior Market Advisor. If you have IRA rollover questions, please post them below or email them directly to me at firstname.lastname@example.org.