Financial advisors with books of business heavily concentrated with retirees face a significant risk of losing assets when the client passes away. One major reason is the failure or inability to make a personal connection with the next generation — the adult children. Often, the children may be working with another financial advisor or institution for their retirement and investing needs. Or, in the case of retirement accounts like IRAs, they may choose to simply liquidate these accounts (and pay a large tax bill!) upon inheriting them. There are many different ways to make a connection with the next generation; one simple way is to discuss IRA distributions and beneficiaries with retired clients. Are beneficiary designations current? Have you discussed the benefits of a Stretch IRA with your client? Talking about the concept and benefits of a “Stretch IRA” can be a door–opener to involving the adult children who are likely to be listed as beneficiaries on those IRAs. Meet with your older IRA account owners and their beneficiaries to discuss the stretch concept:

  • Establishing beneficiary IRAs after the original account owner dies
  • Taking RMDs based upon the (longer) life expectancy of the beneficiary, which preserves more assets within the IRA to grow tax–deferred
  • Limiting withdrawals as much as possible to the minimum amount required each year to maximize the income potential of the IRA

Having this conversation can help your clients and their beneficiaries avoid costly mistakes and avoid paying unnecessary taxes. Use Putnam’s IRA Distribution Checklist to document their existing retirement accounts and beneficiary designations. Educate clients and their beneficiaries on the benefits of Stretch IRA with our Investor Education literature.