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Approach to Take With Clients Who Don't Need Their IRA RMDs

Posted by BSMG on 25 Oct 2016

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Let’s begin to review the way we tend to look at our clients’ IRAs when they don’t need their Required Minimum Distributions (RMDs).

Our approach starts by removing the required distribution amount from the client's account and adjusting the monthly withdrawals necessary for the upcoming year’s RMDs.

We then re-balance the IRA, coordinating that re-balancing effort with any other non-IRA assets in the client's portfolio. This helps to ensure that the portfolio investment attitude is consistent with the client’s investment risk tolerance after the previous year’s investment results and the removal of the RMD.

Lastly we make the appropriate asset adjustments and put the client’s file back in the drawer until next year. When the next year comes around, we sit down with that client for their annual portfolio review and simply repeat the process.

Read More: Huge Opportunities in the Retirement Market with RMDs

When you think about it, it’s not really a “long-term” strategy. Most IRAs tend to be reviewed one year at a time. Our goal today is to help you set them up with a long-range, tax-efficient strategy for your clients’ IRAs.

Here's a scenario for thought: a 70-year-old single male with a $500,000 IRA, earning 6% hypothetical annual return. His IRA will peak at a value of about $577,659 around the age of 82. After that point, the IRA value will begin to decline. Essentially, an IRA will be empty by the estimated age 115 (if they're lucky enough to live that long).

Why does this happen? It’s because of the interaction between the asset earnings and the amount of the Required Minimum Distributions. This calculation assumes a 6% rate of return compounded on an annual basis and is for illustrative purposes only. It does not represent any investments currently available, nor includes fees, commissions, sales charges or expenses, which would have a negative impact on results. IRA Maximization strategies using life insurance and annuity products can change this. 

Set yourself apart from other “financial professionals” with value-added financial practices like this one. 

Access the 6 Year End Strategies

As you are aware, the financial services business is very competitive. To stand out in the eyes of your clients you need to set yourself apart. One way to do this is to use concepts like these to make a significant difference in your clients’ portfolios. When you think about it, you can’t afford NOT to test these concepts with a few of your clients!

Learn More: Make the Most of Your Clients RMDs

Topics: IRAs, RMD