Retirement is not a “Set It and Forget It Proposition

Just as a second opinion is often sought before undertaking an advanced medical procedure, a third-party review of a financial plan can be critical to a sustained and successful retirement. While professional counsel is preferable to a do-it-yourself approach, verification by a yet separate financial professional can help avoid common problems. Moreover, a second set of eyes can be a double-check for important benchmarks including asset allocation, risk tolerance, inflation and the proportion of growth to safety-oriented assets.

Third-party reviewers can assure some solace that costly inattention or mishandling is avoided. They can confirm that retirement plans from prior employers are accounted for; that complete distributions are taken and penalties are avoided; and that required distributions are optimized.

Astoundingly, more than 15 million 401(K) accounts worth more than one TRILLION dollars were identified as forgotten or orphaned in 2010, according to a 2013 article by benefits consulting firm Benefits Pro. Layoffs, career changes, consolidations and the failure by account owners to update their contact information all contribute to the abandonment.

A third-party reviewer can also review that account owners take their required minimum distributions (RMD) timely and completely. The law allows for a 50% tax penalty on any undistributed RMD amount. A second set of eyes can assure that the distribution happens by April 1 of each year following the calendar year when the taxpayer turns 70½.

In the case of RMD’s, retirees may be unaware that they can defer up to 25% of their qualified plans not to exceed $125,000 to age 85 by establishing a qualified longevity annuity contract (QLAC). A married couple could potentially defer up to $250,000. Not only does this push taxable distributions to the future, it may keep the taxpayer from creeping into a higher tax bracket.

While many retirees - both active and prospective - have a grasp of the high-level points surrounding retirement planning, most can surely benefit from the expertise of professionals who can oversee the best-laid plans. In short, a lack of attention can undermine the best of intentions.