I receive more mail about retirement account issues than about any other subject, and that’s because Congress and federal agencies keep updating the regulations.

When trying to answer readers’ questions about retirement, I regularly consult IRA expert Ed Slott and his staff (IRAhelp.com) because they are up to date with all the changes in regulations.

I highly recommend Slott’s book “The Retirement Savings Time Bomb Ticks Louder.” It addresses the critical issue that every other retirement- and tax-related book ignores: protecting your assets from excessive taxation. He believes this factor is more crucial than any other to your “ability to live the lifestyle you’ve been saving for all your life, or to pass on your hard-earned savings to those you love.”

Action plan

There have been significant regulation changes related to retirement accounts since 2020. Slott outlines a five-step action plan that will allow you, not the IRS, to make full use of your retirement plan assets.

Timing of distributions is important, and Slott discusses the right time to start taking money out, the right amount to take, and how to avoid penalties.

The SECURE Act and the SECURE 2.0 Act changed the game for retirement planning. The stretch IRA is no longer an option for most non-spouse beneficiaries, replaced with a shorter 10-year rule. The book provides information needed to establish beneficiary plans.

Roth IRAs

Slott believes the Roth IRA is the best gift Congress has ever presented to the American taxpayer. It allows us to build retirement accounts over the long run and remain free from taxes after income tax is paid on the funds we deposit. Many people believe they will be in a lower tax bracket after retirement. However, that is a myth in most cases.

It is to your advantage to contribute to Roth accounts as soon as possible and convert existing accounts to Roth accounts prior to taking RMDs. Take into consideration that after age 65, if your AGI exceeds certain limits, you will be subject to higher premiums for Medicare Part B.

Original owners of Roth IRAs are not required to take minimum distributions. Neither are beneficiaries, after 2020, but they are required to withdraw all the remaining balances after 10 years.

Permanent life insurance

Slott believes that the most effective yet underutilized strategy for protecting retirement account balances, especially large ones, is to buy permanent life insurance to offset the tax burden beneficiaries may face. Life insurance proceeds are tax-free to beneficiaries. Congress has historically changed tax laws more frequently than it has changed the treatment of insurance benefits.

In order to keep your life insurance estate tax-free, you should consider having the insurance owned by another party. You can consider the use of an irrevocable life insurance trust if otherwise your estate will be subject to estate tax.

Avoiding the death-tax trap

The law regarding estate taxes will change at the end of 2025, unless Congress forestalls the sunsetting of enhanced exemptions. The exemptions for federal estate tax will revert back to previous levels of $5 million per person and $10 million per couple. If you expect your estate to exceed these limits, you should discuss your options with your attorney.

Bottom line: There’s a lot to get straight in the changing regulatory environment. Slott’s book is essential for making decisions now regarding your retirement and that of your beneficiaries.

(Elliot Raphaelson welcomes your questions and comments at raphelliot@gmail.com.)

©2024 Elliot Raphaelson. Distributed by Tribune Content Agency, LLC.